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A STUDY ON SHARE PRICE MOVEMENT


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By:
SURYA RAJ GAUTAM
Shanker Dev Campus
Campus Roll No: 1207/063
T.U. Regd. No: 7-1-271-367-2000

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A Thesis Submitted to:


Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirement for the Degree of


Master of Business Studies (MBS)

Kathmandu, Nepal
September, 2010

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COMMERCIAL BANKS IN NEPAL

RECOMMENDATION
This is to certify that the Thesis

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SURYA RAJ GAUTAM

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Submitted by:

Entitled:

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A STUDY ON SHARE PRICE MOVEMENT OF


COMMERCIAL BANKS IN NEPAL

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has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This thesis is forwarded for examination.

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Prof. Snehalata Kafle Prof. Bisheshwor Man Shrestha


(Thesis Supervisor)

(Head of Research Department)

..
Prof. Dr. Kamal Deep Dhakal
(Campus Chief)

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VIVA-VOCE SHEET

By

SURYA RAJ GAUTAM

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Entitled:

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A STUDY ON SHARE PRICE MOVEMENT OF COMMERCIAL BANKS I N


NEPAL

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And found the thesis to be the original work of the student and written according to the prescribed
format. We recommend the thesis to be accepted as partial fulfillment of the requirement for
Master Degree of Business Studies (MBS)

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Head of Research Department:

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Viva-Voce Committee

Member (External Expert):

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Member (Thesis Supervisor):

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We have conducted the viva voce of the thesis presented

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DECLATATION

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I hereby declare that the work reported in this thesis entitled A Study on Share Price Movement
of Commercial Banks in Nepal submitted to Office of the Dean, Faculty of Management,
Tribhuvan University, is my original work done in the form of partial fulfillment of the requirement
for the Master Degree in Business Studies (M.B.S.) under the supervision of Prof. Snehalata kafle

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of Shanker Dev Campus.

Researcher
Surya Raj Gautam
Shanker Dev Campus

T.U. Regd. No7-1-271-367-2000


Campus Roll No: 1207/ 063

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ACKNOWLEDGEMENTS
This study has been prepared for partial fulfillment of the requirement for the Masters Degree in
Business Studies. It is my privilege to complete this thesis entitled A STUDY ON SHARE PRICE
MOVEMENT OF COMMERCIAL BANKS IN NEPAL, is an outcome of continuous and

gratitude to all for their support.

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immeasurable cooperation and support of several hands. I would like to express my heartfelt

During the research work many individuals have supported me. First of all, I would like to thank my

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thesis supervisor Professor Snehalata Kafle. Who encouraged me from the very beginning to the

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completion of this task with her guidance and profound comments and suggestion. Without her
guidance the thesis would not have been completed. I am also extremely indebted to all the teachers

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of Shanker Dev Campus, who encouraged me in my entire academic attempt.

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I must not forget to thanks the concerned official of the related banks, the concerned officials of
Nepal Securities Board and librarians of Shanker Dev Campus, librarians of central department, T.U.

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and other libraries from where I benefited by collecting information for providing me the related
data. I also wish to express my special gratefulness to my friends Mr. Narayan Pandey, Mr. Dharma

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Raj Paudel, Mr. Rewati Raman Bhattarai and Mr. Dipak Khatiwada for providing necessary

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suggestion during the preparation of thesis.

Last but not the least; I would like to thank all those who directly or indirectly helped me to complete
this thesis.

Surya Raj Gautam


September, 2010

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TABLE OF CONTENTS
Recommendation
Viva-Voce Sheet

Acknowledgement
Table of Contents
List of Tables

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List of Figures

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Abbreviations

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CHAPTER I: INTRODUCTION

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1.1 General Background


1.2 Security Board of Nepal

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1.4 Commercial Bank

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1.3 Nepal Stock Exchange

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1.4.1 Commercial Banks in Nepal

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1.4.2 Commercial Banks Under Study

1.4.2.1 Bank of Kathmandu

1.4.2.2 Everest Bank Limited

1.4.2.3 Himalayan Bank Limited

1.4.2.4 Kumari Bank Limited

1.4.2.5 Laxmi Bank Limited

1.4.2.6 Lumbini Bank Limited

1.4.2.7 Machhapuchhre Bank Limited

1.4.2.8 NABIL Bank Limited

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Declaration

1.4.2.9 Nepal Credit and Commerce Bank Limited

1.4.2.10 Nepal Bangladesh Bank Limited

1.4.2.11 Nepal Industrial and Commercial Bank Limited

1.4.2.12 Nepal Investment Bank Limited

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1.4.2.13 Nepal SBI Bank Limited

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1.4.2.14 Siddhartha Bank Limited

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1.4.2.15 Standard Chartered Bank Limited

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1.5 Statement of the Problem

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1.6 Objectives of the Stud

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1.7 Importance of the Study

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1.8 Limitations of the Study

CHAPTER II: LITERATURE RIVIEW

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2.1Conceptual Framework

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1.9 Organization of the Study

2.1.1 Common Stock

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2.1.2 Features of Common Stock

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15-27
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2.1.3 Advantages of Common Stock Financing

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2.1.4 Disadvantages of Common Stock Financing

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2.1.5 Right of Common Stock Holder

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2.1.6 Earning per Share

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2.1.7 Retained Earning

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2.1.8 Dividend per Share

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2.1.9 Book Value per Share

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2.1.10 Market Value per Share

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2.2 Review of the Journals and Articles

21

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2.3 Review of Masters Thesis

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2.4 Research Gap

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28- 35
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3.2 Research Design

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3.3 Population and Sample

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3.4 Sources of Data

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3.1 Introduction

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3.5 Data Collection Technique

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3.6 Data Processing

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3.7 Data Analysis Tools

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3.7.1 Statistical Tools

3.7.1.2 Standard Deviation

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3.7.1.3 Coefficient of Variation

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3.7.1.1 Average/ Mean

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3.7.1.5 Coefficient of Determination

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3.7.1.6 Regression Analysis

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3.7.1.7 Coefficient of Regression

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3.7.1.8 T- Test

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3.8 Methods of Data Presentation

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3.7.1.4 Correlation Coefficient

CHAPTER IV: DATA PRESENTATION AND ANALYSIS

36- 100

4.1 Introduction

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4.2 Listing of Commercial Banks in NEPSE

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4.3 Annual Trend Analysis of NEPSE Index and Banking Index

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CHAPTER III: RESEARCH METHODOLOGY

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4.5 Analysis of Financial Indicators

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4.5.1 Bank of Kathmandu

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4.5.2 Everest Bank Limited

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4.5.3 Himalayan Bank Limited

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4.5.4 Kumari Bank Limited

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4.5.5 Laxmi Bank Limited

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4.5.6 Lumbini Bank Limited

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4.4 Relationship between EPS, DPS and BPS to MPS

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4.5.7 Machhapuchhre Bank Limited

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4.5.10 Nepal Bangladesh Bank Limited

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4.5.9 Nepal Credit and Commerce Bank Limited

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4.5.8 NABIL Bank Limited

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4.5.12 Nepal Investment Bank Limited

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4.5.13 Nepal SBI Bank Limited

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4.5.11 Nepal Industrial and Commercial Bank Limited

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4.5.15 Standard Chartered Bank Limited

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4.5.14 Siddhartha Bank Limited

4.6 Primary Data Analysis

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4.6.1 Classification of Respondents

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4.6.2 Purpose of Share Investment

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4.6.3 Reasons of Public attraction in Commercial Banks.

85

4.6.4 Public Awareness about Share Investment

86

4.6.5 Status of Present Laws & Policies

87

4.6.6 Role of EPS In the Determination of Share Price

88

4.6.7 Role of Dividend Pattern in the Determination of Share Price

89

4.6.8 Role of Company Assets Structure

91

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4.6.9 Role of Capital Structure

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4.6.10 Role of Political Fluctuation

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4.6.11 Effect of AGM and BOD Election in Share Price

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4.6.12 Company Risk vs. Share Price

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4.6.13 Most Influential Determinant of Share Price

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4.7 Major Findings of the Study

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CHAPTER V: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

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101-105

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5.1 Summary

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5.2 Conclusions

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5.3 Recommendation

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Bibliography

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Appendixes

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1.1

List of the Commercial Banks in Nepal

4.1

Annual Trend Analysis of NEPSE Index and Banking INDEX

37

4.2

Summary of Financial Performance of BOK

39

4.3

Relationship of BPS, EPS, and DPS with MPS of BOK

41

4.4

Simple Regression Equation of BOK

4.5

Summary of the Financial Performance of EBL

4.6

Relationship of BPS, EPS and DPS with MPS of EBL

45

4.7

Simple Regression Equation of EBL

45

4.8

Summary of Financial Performance of HBL

47

4.9

Relationship of BPS, EPS and DPS with MPS of HBL

48

4.10

Regression Equation of HBL

4.11

Summary of the Financial Performance of KBL

50

4.12

Summary of the Financial Performance of LBL

52

4.13

Relationship of BPS, EPS and DPS with MPS of LBL

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4.14

Simple Regression Equation of LBL

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4.15

Summary of the Financial Performance of LUBL

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4.16

Summary of the Financial Performance of MBL

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4.17

Relationship of BPS, EPS and DPS with MPS of MBL

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4.18

Simple Regression Equation of MBL

58

4.19

Summary of the Financial Performance of NABIL

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4.20

Relationship of BPS, EPS and DPS with MPS of NABIL

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4.21

Simple Regression Equation of NABIL

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Table No.

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LIST OF TABLES

Summary of the Financial Performance of NCCBL

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4.23

Summary of the Financial Performance of NBBL

64

4.24

Relationship of BPS, EPS and DPS with MPS of NBBL

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4.25

Simple Regression Equation of NBBL

66

4.26

Summary of the Financial Performance of NICBL

67

4.27

Relationship of BPS, EPS and DPS with MPS of NICBL

69

4.28

Simple Regression Equation of NICBL

69

4.29

Summary of the Financial Performance of NIBL

71

4.30

Relationship of BPS, EPS and DPS with MPS of NIBL

4.31

Simple Regression Equation of NIBL

4.32

Summary of the Financial Performance of NSBI

4.33

Relationship of BPS,EPS and DPS with MPS of NSBI

4.34

Simple Regression Equation of NSBI

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4.35

Summary of the Financial Performance of SBL

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4.36

Summary of the Financial Performance of SCBL

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4.37

Relationship of BPS, EPS and DPS with MPS of SCBL

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4.38

Regression Equation of SCBL

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4.39

Classification of Respondents

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4.40

Purpose of Share Investment

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4.41

Reason of Public attraction in Commercial Banks

85

4.42

Public awareness about Share Investment

86

4.43

Status of Present Laws & Policies

87

4.44

Higher EPS Indicates Higher Share Price

88

4.45

Role of Dividend Pattern in Share Price Determination

90

4.46

Role of Company Assets Structure in Share Price Determination

91

4.47

Good Capital Structure Indicates Higher Share Price

92

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4.22

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76

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Policies Situation Changes the Share Price

93

4.49

AGM and Election of BOD effect in Share Price

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4.50

Higher the risk, More the Share Price

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4.51

Most Influential Determinant of Share Price

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4.48

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LIST OF FIGURE

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Relationship between MPS, DPS, BPS and EPS of BOK

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Relationship between MPS, DPS, BPS and EPS of EBL

44

Relationship between MPS, DPS, BPS and EPS of HBL

48

Relationship between MPS, DPS, BPS and EPS of KBL

51

Relationship between MPS, DPS, BPS and EPS of LBL

Relationship between MPS, DPS, BPS and EPS of LUBL

56

Relationship between MPS, DPS, BPS and EPS of NABIL

60

Relationship between MPS, DPS, BPS and EPS of NCCBL

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10

Relationship between MPS, DPS, BPS and EPS of NICBL

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11

Relationship between MPS, DPS, BPS and EPS of NIBL

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12

Relationship between MPS, DPS, BPS and EPS of NSBI

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13

Relationship between MPS, DPS, BPS and EPS of SBL

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Relationship between MPS, DPS, BPS and EPS of SCBL

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15

Purpose of Share Investment

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Reason of Public Attraction in the Share of Commercial Bank

86

17

Public Awareness on Share Investment

87

18

Status of Present Laws and Policies

88

19

Higher EPS Indicates Higher Share Price

89

20

Dividend Pattern Matters in Share Price Determination

90

21

Role of Company Assets Structure in Share Price Determination

92

22

Role of Capital Structure in Share Price

93

23

Role of Political Situation Change in Share Price

94

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Annual Trend Analysis of NEPSE Index and Banking Index

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Figure No.

Effect of AGM and BOD in Share Price

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Role of Risk in Share Price Determination

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Annual General Meeting

AM

Arithmetic Mean

ATM

Automated Teller Machine

BOD

Board of Directors

BOK

Bank of Kathmandu

BPS

Book-Value per Share

B.S.

Bikram Sambat

Co.

Company

CV

Coefficient of Variation

DPS

Dividend per Share

EBL

Everest Bank Limited

EPS

Earning per Share

FNCCI

Federation of Nepalese Chamber of Commerce and Industries

F/Y

Fiscal Year

GDP

HBL

ICAN

Institute of Chartered Accountants of Nepal

i.e.

That is

KBL

Kumari Bank Limited

LBL

Laxmi Bank Limited

Ltd.

Limited

LUBL

Lumbini Bank Limited

MBL

Machhapuchhre Bank Limited

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AGM

Gross Domestic Product


Himalayan Bank Limited

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ABBREVIATION

Market per Share

NA

Not Available

NABIL

NABIL Bank Limited

NBBL

Nepal Bangladesh Bank Limited

NCCBL

Nepal Credit and Commerce Bank Limited

NEPSE

Nepal Stock Exchange

NIBL

Nepal Investment Bank Limited

NICBL

Nepal Industrial and Commercial Bank Limited

NIDC

Nepal Industrial Development Corporation

NRB

Nepal Rastra Bank

NSBI

Nepal SBI Bank Limited

PNB

Punjab National Bank

Re.

Rupee

Rs.

Rupees

SEBON

Security Board of Nepal

SBL

Siddhartha Bank Limited

SCBL

Standard Chartered Bank Nepal Limited

TU

UK

United Kingdom

USA

United States of America

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Tribhuvan University

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CHAPTER I
INTRODUCTION

1.1 General Background

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Capital is the lifeblood of the business organizations. Every business enterprise requires short term,
intermediate and long term capital for the smooth operation and expansion of the organizational

activities. Among these types of fund, the long term funds plays highly significant role for future

growth and prosperity of the organizations. The economy of the country largely depends upon the

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utilization of its resources and mobilization of capital. The mobilization of the capital is an important

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tool to utilize the resources and hence it affects the overall economy. The Financial institutions

contribute the national economy by accumulating the capital funds to meet the financial needs of

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different productive sectors. They actively participate in the money market and the capital market, as

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both suppliers and demanders of the funds.

Financial Market

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Financial Market can be defined as the centre which provides facilities for buying and selling of
financial claims and services. Financial market includes the trading activities of financial institutions

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like Share, Bond, Debenture, etc. Hence it actually refers to the money market and capital market

Money Market

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which facilitates the transfer of funds from the savers to users.

Money Market deals with the short term financial market which facilitates liquidity and

marketability of securities. It provides an institutional mechanism for the transactions of short term
securities. Commercial Bank, Development Banks, Financial Companies and other saving/credit
unions are the Money market makers.

Capital Market
The capital market is the market meant for long term securities issued by the government or a
corporation. The capital markets typically involve the financial assets that have life spans of greater
than one year. There are various instruments or securities used in the capital market such as stock,
bonds or debentures etc. Development and expansion of capital market is essential for the rapid

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growth of the country. The capital market helps in economic development by mobilizing long-term
capital needed for productive sector. The capital market also consists of both non-securities market
and securities market. Non-securities market refers that the mobilization of the financial resources by
the financial institutions in the form of deposits and loans. It is the place where financial claims and
obligations are brought and sold that have maturity period of more than one year. It can be further

Primary Market

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divided into two types Primary Market and Secondary Market.

Primary Market is the place where corporations and government issue new securities. All securities,

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whether in money or capital markets, are initially issued in Primary Market. This is the only market

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in which the company or government is directly involved in the transactions and receives directly

benefits from an issue that is the company actually receives the proceeds from the sale of securities.

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Once the securities begin to trade among individuals, businessman, governments, financial

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institutions, savers and investors, they become a part of the secondary market. The term Primary

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Market is used to denote the market for the original sale of securities by an issuer and to the public.

The issuer receives cash which may be invested in productive assets or retirement of debt. Corporate

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bodies issue new securities in the primary market hence, securities available for the first time are

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offered through the primary security market. The issuer may be a brand new company or that has

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been in business for years. The securities offered might be a new type for the issuer or additional

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amount of security- used in the past.

Secondary Market

Secondary Market is the market in which securities are traded that has been issued in the past.

Simply, secondary markets are markets in which existing outstanding securities are traded between

the investors i.e. buyers and sellers. It creates the price and allow for liquidity. Thus, Secondary
Market mainly deals with previously issued shares traded through stock exchange, over the counter
market or directly selling.

The function of the secondary market is to provide liquidity for securities purchased in the primary
market. Once investors have purchased securities in the primary markets, they need a place to sell
those securities. Without the liquidity of the secondary market, firms would have difficulty raising

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funds for productive purpose in the primary markets. Secondary Market is another term can be called
as Security Market.

1.2 Security Board of Nepal [SEBON]


Security Board of Nepal was established on May26, 1993 under the provision of the Security

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Exchange Act, 1983. It was established with the objectives of the promoting and protecting the
interests of investors by regulating the securities market. It also assumes the responsibility of
development of securities market in the country, besides the regulatory role. Security Board has
identified the policy development, legal and regulatory reform, stand arising disclosers, bringing

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enforcement to insure compliance and promoting broad based market as priority area to reform. The

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private sector has also been participating equally in establishing a sound system of security
exchange. In private sector investors, listed companies, financial and market intermediaries and in

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government sector Ministry of Finance, Registrar of Companies (Ministry of Industry, Commerce

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and Supply), Nepal Rastra Bank, Nepal Stock Exchange, Federation of Nepalese Chamber of

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Commerce and Industries (FNCCI), Institute of Chartered Accountants of Nepal (ICAN) and

Associations of Chartered Accountants have been playing vital role in promoting the capital market

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of the country

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The objectives of the Board are to promote and protect the interest of the investors by regulating the

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issuance, sale and distribution of securities and purchase, sale or exchange of securities, to supervise,

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look after and monitor the activities of the stock exchange and other related firms on securities
business, and to render contribution to the development of the capital market by making securities
transactions fair, healthy, efficient and responsible.

1.3 Nepal Stock Exchange [NEPSE]

The securities exchange centre was established with an objective of facilitating and promoting the
growth of capital market. Before its conversion into stock exchange, it was only a capital market

institution undertaking the job of brokering, underwriting, managing public issue, market making for
government bonds and other financial services. In 1993, the centre was converted into Nepal Stock
Exchange [NEPSE] with the basis objectives of imparting free marketability and providing liquidity
to the government and corporative securities by facilitating transactions in its trading floor through
market intermediaries, such as brokers, market makers etc. and it is a non profit organization ,

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operating under securities exchange Act 1983. Government of Nepal (58.67%), Nepal Rastra Bank
(34.60%), Nepal Industrial Development Corporation NIDC (6.13%) and Licensed Members General Public (0.60%) are the share holders of the NEPSE. It is the licensed dealer for Primary and
Secondary market.

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Presently, there are 27 valid members brokers (currently working 23 members) and 165 listed
companies (20th Feb., 2010) in NEPSE. It has been adopting Fully Automatic system on trading

shares. Hence, transactions are conducted on the open trading floor where price is determined when

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bid and offer match i.e. as per the demand and supply of the shares.

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The stock exchange provides floor for trading the shares of listed companies creating the liquidity in

shares markets. The liberal financial policy adopted by Nepalese government after the restoration of

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democracy tried to reform the financial market of Nepal. That result open practice of buying and

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selling of securities in the open floor of NEPSE maintaining the suitable market price of the shares.

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In general, the prices are determined according to the demand and supply of the shares. This study
attempts to examine the different determiners of the share price relating the MPS with major

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1.4 Commercial Bank

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financial indicators.

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As in any other economies, the commercials banks play a vital role in the economic development of

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the country through facilitating the intermediary process in between capital surplus and deficit units.

The commercials bank plays a dual role of mobilizing as well as allocating the limited resources

towards peoples needs for the development of the economic system. Financial business in any
country is determined by political, social and economic factors. Moreover, level of economic

development, banking awareness, growth and habits of population services provided by banks, level

of urbanization and income distribution are other key factors affecting financial business. The history
of modern bank begins from the establishment of Bank of Venice in 1157 A.D. Moreover, the
growth of bank accelerated after the introduction of the Banking Act 1883 in the UK as it allowed
opening of a joint stock company bank.

1.4.1 Commercial Banks in Nepal


In Nepal, the history of modern banking was started from establishment of Nepal Bank Ltd, Which
was established as first commercial bank in 1997. The bank played a dual role of commercial bank

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and central bank until the establishment of Nepal Rastra Bank. Nepal Rastra bank was established in
1956. The whole banking sector was dominated by two state owned commercial banks Nepal Bank
ltd and Rstriya Banijya till establishment of Nabil Bank in 1984. Bank and banking activities
accelerated only after the adoption of a liberal economic policy in the mid 80s and the establishment
of Nepal Arab Bank ltd in 2041 B.S. as a first joint venture commercial bank. Subsequently other

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joint venture banks were established with collaboration of foreign banks. The joint venture banks
operating in Nepal are Nepal SBI Bank Limited, Everest bank Limited, Standard Chartered Bank
Limited, Himalayan Bank Limited etc. NIC Bank is the first fully Nepalese private sectors bank.

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Currently there are 28 commercial banks operating in Nepal till establishment of Mega Bank

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Limited. There are some commercial banks like Commerz and Trust Bank Nepal Limited; Century
Bank etc. are in pipeline to perform their activity. The history of Nepalese Commercial Banks with

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their operation date and Head office are presented in the following table

S.N.

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Table: 1.1
List of the Commercial Banks in Nepal
Names of commercial banks

Nepal Bank Limited

2.

Rastriya Banijya Bank

3.

Agriculture Development Bank Ltd.

4.

NABIL Bank Limited

5.

Head Office

Date (A.D.)
1937/11/15

Kathmandu

1966/01/23

Kathmandu

1968/01/02

Kathmandu

1984/07/16

Kathmandu

Nepal Investment Bank Limited

1986/02/27

Kathmandu

6.

Standard Chartered Bank Nepal Ltd.

1987/01/30

Kathmandu

7.

Himalayan Bank Limited

1993/01/18

Kathmandu

8.

Nepal SBI Bank Limited

1993/07/07

Kathmandu

9.

Nepal Bangladesh Bank Limited

1993/06/05

Kathmandu

10.

Everest Bank Limited

1994/10/18

Kathmandu

11.

Bank of Kathmandu Limited

1995/03/12

Kathmandu

12.

Nepal Credit and Commerce Bank Ltd

1996/10/14

Siddharthanagar

13.

Lumbini Bank Limited

1998/07/17

Narayangadh

14.

Nepal Industrial & Commercial Bank Ltd

1998/07/21

Biaratnagar

15.

Machhapuchhre Bank Limited

2000/10/03

Pokhara

16.

Kumari Bank Limited

2001/04/03

Kathmandu

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1.

Operation

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17.

Laxmi Bank Limited

2002/04/03

Birgunj

18.

Siddhartha Bank Limited

2002/12/24

Kathmandu

19.

Global Bank Ltd.

2007/01/02

Birgunj

20.

Citizens Bank International Ltd.

2007/6/21

Kathmandu

21.

Prime Bank Ltd

2007/9/24

Kathmandu

22.

Sunrise Bank Ltd.

2007/10/12

Kathmandu

23.

Bank of Asia Nepal Ltd.

2007/10/12

Kathmandu

24.

Development Credit Bank Ltd.

2001/01/23

Kathmandu

25.

NMB Bank Ltd.

1996/11/26

Kathmandu

26.

KIST Bank Ltd.

2003/5/32

Kathmandu

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Putalisadak, Kathmandu

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(Source: www.nrb.org.np)

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1.4.2 Commercial Banks under Study

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In this study, fifteen commercial banks listed with the NEPSE are taken for analysis. The brief

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introduction of these banks is presented below:

1.4.2.1 Bank of Kathmandu

Bank of Kathmandu started its operation in March 1995 with the objective to stimulate the Nepalese

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economy and take it to newer height. BOK also aims to facilitate the national economy

and to

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become more competitive globally. This bank provides a full range of commercial banking services.

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It has 37 branch offices and its head office is located in Kamaladi, Kathmandu.

1.4.2.2 Everest Bank limited

Everest Bank Limited (EBL) started its operation in 1994 with a view and objectives of extending
professionalized and efficient banking services to various segments of the society. Punjab National

Bank (PNB), the joint venture partner of the bank holds 20% equity of EBL. EBL provides a full

range of commercial banking services. This bank has 26 branch offices and its head office is located
in New Baneshwor, Kathmandu.

1.4.2.3 Himalayan Bank Limited


Himalayan Bank Limited (HBL) was established in 1993 in joint venture with Habib Bank Limited
of Pakistan. This bank was established by a few distinguished personalities of Nepal in partnership
with employees Provident Fund and Habib Bank Limited of Pakistan. The Bank commenced its

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operations from January 1993. The banks main objective is to be the Bank of first choice. Despite
tough competition in the Nepalese banking sector, Himalayan Bank has been able to maintain a lead
in the primary banking activities- Loans and Deposits. It provides a wide range of commercial
banking services including industrial and merchant banking. It has 29 branch offices and its head

1.4.2.4 Kumari Bank Limited

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office is located in Thamel, Kathmandu.

It is a fully Nepalese owned bank. The bank came into existence as the fifteenth commercial bank of

Nepal by starting its banking operation from april3, 2001 with an objective of providing competitive

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and modern banking services in the Nepalese financial market. Share ownership of bank is 70% from

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promoters and remaining from general public. The bank has been providing wide range of modern

banking service through 22 points of representations located in various urban and semi-urban part of

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the country.

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1.4.2.5 Laxmi Bank Limited

Laxmi Bank Limited was incorporated in April, 2002 as the 16th commercial bank in Nepal with

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total assets of NPR 20 billion at april2010 and 22 branches across the country. Laxmi bank is

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amongst the top financial institutions in the country in terms of size and quality of operations. In

2004 laxmi merged with HISEF financial Limited, a first generation financial company which was

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the first merger in the Nepali corporate history.

1.4.2.6 Lumbini Bank Limited

Lumbini Bank Limited is a national level commercial bank offering a wide range of banking

solutions and series meticulously customized to the needs of the customers. It was established in
1998. This is the first regional commercial bank in Nepal. Which started its operation from
Narayangarh spreading its sings to further four more places at Hetauda, Butwal, Durbarmarg and
Biratnagar. The bank has 9 branches.

1.4.2.7 Machhapuchhre Bank Limited


Machhapuchhre Bank Limited was registered in 1998 a steh first regional commercial bank to start
banking business from the western region of Nepal with its Head Office in Pokhara. The bank in last
few years have really opened up with branches spread all around the country. At this stage it has its

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corporate office in Kathmandu and branch offices in other parts of Kathmandu and different parts of
the country. The bank is operating its 40 branches now.

1.4.2.8 NABIL Bank Limited


Nabil Bank Ltd., the first foreign joint venture bank of Nepal started operation in july1984. Nabil

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was incorporated with the objective of extending international standard modern banking services to
various sectors of the society. Pursuing its objective, Nabil provides a full range of commercial
banking services through its 19 points of representation across the kingdom and over 170 reputed

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1.4.2.9 Nepal Credit and Commerce Bank Limited

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correspondent banks across the global.

Nepal Credit & Commerce Bank formally registered as Nepal-Bank of Ceylon Ltd. (NBOC),

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commenced its operation on 14th October 1996 as a joint venture with Bank of Ceylon, Srilanka. It

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was the first largest authorized capital of NRS 1000 million. The Head Office of the bank is located

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at Siddharthanagar, Rupandehi, the birth place of LORD BUDDHA. While its corporate office is

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placed at Bagbazar, Kathmandu.

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The name of bank was changed to Nepal Credit & Commerce Bank Ltd. On 10 th September, 2002.

Due to transfer of share and management of the Bank from bank of Ceylon, an undertaking of

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government of Srilanka to Nepalese promoters

1.4.2.10 Nepal Bangladesh Bank Limited

Nepal Bangladesh Bank Limited was established in june1994 with an authorized capital of Rs 240

million and paid up capital of Rs 60 million as a joint venture with IFIC bank limited and Bank Asia
Limited of Bangladesh. Its Head Office is situated at New Baneshwor. The prime objective of this

bank is to render banking services to the different sectors like industries, traders, businessmen,
priority sector, small enterprises and weaker section of the society and every other people who need
banking service.

1.4.2.11 Nepal Industrial and Commercial Bank Limited


Nepal Industrial & Commercial Bank Limited commenced its operation on 21july1998 from
Biratnagar. The bank was promoted by some of the prominent business houses of the country. The

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current shareholding pattern of the bank constitutes of promoters holding 50% of the share while
49% is held by the general public. NIC bank has over 34000 shareholders. The bank has grown
rapidly with 25 branches throughout the country while several branches are planned to open this
year. All branches are inter-connected through v-sat and are capable of providing real time on-line
transactions.

its quality management system standard in the year 2006.

1.4.2.12 Nepal Investment Bank Limited

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NIC bank was the first commercial bank in Nepal to have received ISO 9001:2000 certification for

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Nepal Investment Bank Ltd. (NIBL), previously called as Nepal Indosuez Bank Ltd., was established

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in 1986 as a joint venture between Nepalese and its French partner Credit Agricole Indosuez, a
subsidiary of one the largest banking group in the world. With the decision of Credit Agricole

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Indosuez to divest, a group of companies comprising of bankers, professionals, industrialists and

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businessmen, has acquired on April 2002 the 50% shareholding of Credit Agricole Indosuez in Nepal

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Indosuez Bank Ltd and its name changed to Nepal Investment Bank Ltd. The bank has following
shareholding structure: A group of companies holding 50% of the Capital, Rastriya Banijya Bank

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holding 15% of the Capital, Rastriya Beema Sansthan holding 15% of the Capital and the remaining

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Durbarmarg, Kathmandu.

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shares being held by the general public. NIBL has 18 branch offices and its head office is in

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1.4.2.13 Nepal SBI Bank Limited

Nepal SBI Bank Limited is the first indo-Nepal joint venture in the financial sector sponsored by

three institutional promoters namely state bank of India Employees Provided Fund an Agriculture
Development Bank of Nepal through a memorandum of understanding signed on 17 th July 1992. The
bank was incorporated as a public limited company at the office of the company register on Apri28,

1993 and was licensed by NRB on july6, 1993. The bank commenced operation with effect from
july7, 1993 with one full-fledged office at Durbarmarg, Katmandu with 18 staff members.

1.4.2.14 Siddhartha bank Limited


Siddhartha bank limited commenced operations in 2002. The bank is promoted by a group of highly
reputed Nepalese dignitaries having wide commercial experience. The environment of Nepalese
banking sector is undergoing a rapid transaction. With liberalization in financial markets and

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integration of domestic market with external market, bank operations have become more complex
and dynamic. The vision statement of the bank describes the core values and purpose that guide the
bank as well as an envisioned future. Fundamentally in all dealing SBL earnestly believes in
transparency, financial soundness, efficiency and better technology. SBL has 30 branches.

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1.4.2.15 Standard Chartered Bank Limited


Standard Chartered Bank Nepal Limited (SCBL) has been in operation in Nepal since 1987 when it

was initially registered as a joint-venture operation. Today the Bank is an integral part of Standard

Chartered Group who has 75% ownership in the company with 25% shares owned by the Nepalese

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public. The bank enjoys the status of the largest international bank currently operating in Nepal. It

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has 11 branch offices and 4 extension counters in Nepal and its head office is located in New

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1.5 Statements of the Problem

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Baneshwor, Kathmandu.

Ordinary shares comprise the largest category of securities in the corporate business in Nepal listed

with the Nepal Stock Exchange. Price of the common stock in the primary market is at par value,

changes continuously in the secondary market due to internal

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or at par and the stock price

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however, the price of the common stock in the secondary market is either under priced, over priced

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(organizational) and external (political, economic, financial) factors. Moreover, the NEPSE index is

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sensitive to both internal and external factors.

The shares of the commercial banks play a vital role in the overall index of NEPSE and the overall

index is highly influenced by the shares of the commercial banks. The sector wise contribution in

total traded volume in NEPSE is mostly dominated by the financial sector. The shares of the publicly
quoted commercial banks seem to be the basis of investment to all potential investors.

Only few investors of Nepalese share market are aware of the causing agent of share price. It means
that most of the investors are unknown about the financial performance of the company but tends to
invest on the company without proper financial analysis. It causes the unusual relation of the
financial indicators EPS, BPS, DPS, etc. with the market price of the share. The market rumors
relating the financial position of the company is the major analytic tool for the most of the Nepalese
investors. That has caused that the MPS of the most of the foreign joint venture commercial bank are

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high in comparison with the other banks and manufacturing companies. In this context, the research
problem of this study can be presented in the following points:
What are the major determinants of the stock price of Nepalese Commercial banks listed in
NEPSE?
Is there any relation between MPS with the major financial indicators (EPS, BPS and DPS)?

1.6

Objectives of the Study

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Are the investors aware of financial indicators which influence the MPS Of the company?

Primarily, this thesis is intended for the partial fulfillment of the requirement of the degree of

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Masters in Business Studies (MBS) as demanded by the faculty of Management, TU. Beside this, the

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general objectives of this study are listed below:

To identify the prime determining factors of Share Price fluctuation of Nepalese Commercial

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Banks

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To examine and evaluate the relationship between MPS with the various financial indicators

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like EPS, BPS, DPS etc.

To analyze the market trends of MPS of commercial banks with their financial indicators.

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To provide a set of recommendations based on the findings of the study to the concerned.

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1.7 Importance of the Study

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The study focuses on the stock price movement of the commercial banks, so the study is particularly
significant to the investors, mangers, bankers, stock analyst, brokers, government officials,

academicians, students and any other stakeholders who are interested in understanding the share
price behavior of the commercial banks.

Investors invest money with the expectation of acquiring good returns from their investment. This

study analyzes financial situation of the commercial banks and performance of its traded stock.
Therefore, the study is significant to investors and general public to help them undertake rationale
decisions while investing in the stock of the commercial banks. Moreover, the study provides insight
over the financial position and capitalization status of the commercial banks. The bank management
can analyze the financial position and performance of their traded stock to undertake necessary steps
for its improvement. Since, the study provides general picture of the existing share market, it is

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significant to the government and the policy making agencies to prepare/ change policies in a timely
manner for efficient functioning and growth of stock market.

In addition, the study would also be useful to stock analyst, brokers and any persons actively
involved in stock market. Moreover, the study is significant to academicians and students who are

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willing to learn about the stock price behavior of the commercial banks and also to those who wanted
to pursuer their career in banking or share business. Taking all the above issues into consideration,
this study will analyze the stock price behavior of the listed commercial banks.

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1.8 Limitations of the Study

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Due to the limitations of the time, cost and other resources this research work is not able to study the
whole Nepalese capital market in details. The major limitation of the study is presented below:

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This study covers only the relevant data of six years i.e. from fiscal year 2003/2004 to

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2008/2009.

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The study is based on Primary and Secondary Data. So the validity and reliability of the data
depends upon their sources.

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The study is done for the particular fulfillment for MBS degree in Management, so it is not a

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comprehensive study.

Only few financial and statistical tools are used in the study.

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For the purpose of study only common stocks or ordinary stocks are taken.

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The study has been designed (to concentrate on some of the banking sector, which is a part of
total capital market). So the conclusion cannot be generalized on the total capital market.

1.9 Organization of the Study


Chapter I [Introduction]

Chapter I introduce the major issue related to the share market of Nepal, objectives, significance and
limitations of the study.

Chapter II [Literature Review]

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This chapter is the brief review of literature related to this study. It includes a discussion on the
conceptual framework and review of the major studies. It gives an overview of the related literature
done in the past related to this study.

Chapter III [Research Methodology]


Sources of data are mentioned and described in this chapter.

Chapter IV [Data Presentation and Analysis]

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Chapter III, Research Methodology, describe the different methodologies employed in this study.

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This chapter consists of analysis, evaluation, presentation and finding of available data and

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information.

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Chapter V [Summary, Conclusion and Recommendation]

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This chapter includes the summary, conclusion and the recommendation of the study.

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The Bibliography and Appendices have been given at the end of the study

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CHAPTER II
LITERATURE REVIEW
Review of literature means reviewing research studies and other relevant propositions in the

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related area of the study so that all the past studies, their conclusions and deficiencies may be
known and further research can be conducted. A short glance of past studies in common stock and
their determiners are present in this section. In the context of Nepalese Financial Market, no

sufficient studies have been made in the past related to share market. Most of the investors have no

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sufficient knowledge about the share market.

2.1 Conceptual Framework (Review of Text Books)

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2.1.1 Common stock

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Common stock is legal representation of equity for ownership position in a corporation. It lies under

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variable income security between two types of securities: fixed income and variable income and is a
negotiable instrument. It can be bought and sold in the secondary market. The holders of common

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stock are called shareholders or stockholders. The common stock is the permanent and vital source of

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capital since they do not have a maturity date. As a return to the contribution of shareholders

investment, they are entitled to dividends. It means, in the case of organizational profit, the

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shareholders are provided a certain sum of money as dividend. The amount or rate of dividend is

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fixed by the Board of Directors. Hence, the common stock is a kind of variable income security.

Being the owner of the company, the shareholders bear the risk of ownership. They are entitled to
dividends after the claim of outsiders are satisfied.

2.1.2 Features of Common Stock:


Claim on Income:

The common stockholders bear a right to claim on income, which is earning available for ordinary
shareholders, after paying expenses, interest charges, taxes and preferred dividend, if any. The
income may be distributed among shareholders in the form of dividend or retained earnings.
Dividends are immediate cash flow to shareholders, whereas retained earnings are the income
reinvested in the organization. Which ultimately increase the net worth of Shareholders Claim on
Assets: The Common Stockholders have a residual claim on the companys assets in case of

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liquidation. Out of the realized value of assets, first the claims of debt-holders and then preference
shareholders are satisfied, and the remaining balance, if any, is paid to the common stockholders.

Right to control:
The ordinary shareholders have the legal power to elect directors to the board. If the board fails to

of the company through their voting right and right to maintain proportionate ownership.

Voting Right:

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protect their interests, they can replace the directors. They are able to participate in the management

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For each share of common stock owned, the common stockholder has the right to cast one vote at the

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Annual General Meeting of stockholder. Common stockholders have the right to vote on
stockholders matter, such as the selection or the board of directors, sale of fixed assets, merger of the

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company etc.

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Pre emptive Right:

The law grants shareholders the right to purchase new share in proportion to their current ownership.
Thus the pre-emptive right entitles a shareholder to maintain his proportionate share ownership in the

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company. The stockholders option to purchase, a stated number of new shares at a specified price

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during a given period, is called right which can be exercised at a subscription price which is

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generally much below the current market price of shares.

Limited Liability:

The common stockholders are the true owner of the company, but their liability is limited to the
amount of their investment in shares. If a stockholder has already fully paid the issue price of share

purchased, s/he has nothing more to contribute in the event of financial distress or liquidation. The

limited liability feature of share encourages unwilling investors to invest their funds in the company
which helps company to raise funds. (Pandey, 1999:905-908)

Most of the investors are wise to invest their saving funds in stocks, with the expectation of future
cash inflow as dividends and maximization of value of their holdings in the market. Dividends and
value of the firm are linked with the earning power of the firms, which ultimately affects the market
price of shares. So, brief discussions have been presented in the following paragraphs, on earning per
share, dividend per share, book value per share and market price per share.

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2.1.3 Advantages of Common Stock Financing

There are several advantages of the corporation associated with the common stock financing, which
can be mentioned as follows:
Common

Stock

does

not

obligate

the

firm

to

make

fixed

payments

to

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stockholders. If the company generates earnings and has no pressing internal needs, it can pay
common dividends. Had it used debt, it would have incurred a legal obligation to pay interest
on it, regardless of its operating conditions, its cash flow, and so on.

Common stock provides a cushion against losses from the creditors viewpoint, the sale of

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common stock increase the creditworthiness of the firm. This, in turn, raises its bond rating

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lowers its cost of debt, and increases its future ability to use debt.

Common stock carries no fixed maturity date its never has to be repaid as would a debt

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issue.

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If a companys prospects look bright, then common stock can often be sold on better terms

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than debt. Stock appeals to certain groups of investors because (a) it typically carries a higher

expected total return (dividends plus capital gains) than does preferred stock or debt and (b)

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since stock represents the ownership of the firm, it provides the investor with a better hedge

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against unanticipated inflation than does preferred stock or bonds. Ordinarily, common stock
increases in value when real asset values rise during inflationary periods.

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When a company is having operating problem, it often needs new funds to overcome its

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problem. However, investors are reluctant to supply capital to a troubled company, and if

they do, they generally require some type of security. From a practical standpoint, this means
that a firm which is experiencing problems can often obtain new capital only by issuing debt,
which is safer from the investors standpoint. Corporate treasures are well aware of this so

they often have option to finance with common stock so as to maintain a reserve borrowing

capacity- indeed surveys have indicated that maintenance of an adequate reserve of

borrowing capacity is the primary consideration in most financing decisions. (Western and
Brigham, 1987:678-679)

2.1.4 Disadvantages of Common Stock Financing


The disadvantages of common stock financing can be summarized in the following points:

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The sale of common stock may extend voting tight or control to the additional stock owners
who are brought into the company. For this reason, additional equity financing is often
avoided by small firms, whose owner-managers may be unwilling to share control of their
companies with outsiders. Note, though, that firms can use special classes of common stock
that do not carry voting rights.

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Common stock gives more owners the right to share in income. The use of debt enables the
firm to acquire funds at a fixed cost, whereas common stock gives equal right to new
stockholders to share in the net profits of the firm.

The costs of underwriting and distributing common stock are usually higher than those for

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underwriting and distributing preferred stock or debt.

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The sale of new common stock may be perceived by investors as a negative signal, and hence

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Right to income

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2.1.5 Right of Common Stock Holders

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cause the stock price to fall. (Brigham and Gapenski, 1990:472)

Common stockholders are entitled to share in the earning of the company only if cash dividends are

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paid. Shareholders also prosper from the market value appreciation of their shares but they are

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entirely dependent on the board of directors for the declaration of dividends that give them income

Voting Right

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creditors.

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from the company. Thus the priorities of common stockholders differ markedly from that of the

Because the common stockholders of a company are its owners, they are entitled to elect a board of
directors. In a large corporation, shareholders usually exercise only indirect control through the

board of directors they elect. The board, in turn, selects the management and management actually
controls the operations of the company. Voting can be done either in person at the shareholders
annual meeting or by proxy.

Right to Purchase new Share


A firms corporate charter or state statute may require that a new issue of common stock or an issue
of securities convertible into common stock be offered first to existing common stockholders
because of their preemptive right.

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2.1.6 Earning Per Share
Earning per Share is calculated by dividing a companys net revenues by the outstanding shares. This
gives a number that can be used to compare the earning of companies since it is unlikely any two
companies will have the same number of shares outstanding. Accounting earnings that represent the
different revenues and expenses, including the expenses associated with non-equity source of fund

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(such as interest to debt, dividend of preference shares) is known as total earning available for
common stock. If this portion of income is divided by number of outstanding shares, we get earning
per share. (Sharp and Bailey, 2001:633)

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2.1.7 Retained Earning

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The total amount of earning of the firm that has not paid out as dividend through its history and

indicated in the Balance Sheet as earning is known as Retained Earnings. These earnings are

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reinvested in the firm.

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2.1.8 Dividend per Share

Dividend per share is calculated by dividing the total dividend amount paid for the financial period

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by the number of ordinary shares in issue. The directors may pay an interim dividend during the

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accounting period and then recommend a final rate of dividend per share for approved by

Forms of Dividend

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shareholders at the Annual General Meeting (AGM).

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Cash dividend: Payment made in cash to shareholder are termed as cash dividends. Distribution of
cash dividend causes the reduction in total assets and net worth of the company.

Stock Dividend: Distribution of bonus share as dividend to the stockholder is known as Stock
Dividend. This increases the number of shares of the company.

2.1.9 Book Value per Share


The book value of the equity reflects the historical costs of brick and meters the physical assets of
the company. A well run company with strong management and an organization that functions
effectively should have a market value greater than the historical book value of its physical
assets.(Western & Brigham, 1987: 674)

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2.1.10 Market Value per Share

Market value per Share is the current price at which the stock is traded. For activity traded stocks
that have thin markets, prices are difficult to obtain. Even when obtainable, the information may
reflect only the sale of a few shares of stock and non typing the market value of the form as a whole.

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For companies of this sort, care must be taken in interpreting market price information.
The market price of share gives the value of shares, and the value of the organization. The market

price is that price in which shares are traded or the stock amount which is paid by the buyer to the

seller to purchase the stock of company. Since the common stock holders are owner of organization

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and have least priority to claim in liquidation, the price is highly volatile very sensible to

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environmental factors.

Due to the market imperfection and uncertainty, shareholders may give a higher value to the near

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dividends and capital gains. Thus, payment of dividend may significantly affect the market price of

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shares. Higher dividends increase the value of shares and low dividends reduce the value. (Pandey,

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1995: 681)

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2.2 Review of the Journals and Articles

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Review of articles, journals, bulletins and previous studies are important for research. The review of

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articles and journals gives a clear insight on the developments and updates in the area of research. In

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this section, articles and journals related to Nepalese stock market and its behavior is reviewed.

(Gurung, Dec 2004) conducted a research on Growth and Performance of Securities Market in
Nepal. His paper attempted to study the growth trend and analyze the performance of Nepalese
securities market. Likewise, the variables such as number of listed and traded companies and their

securities, number of transactions, trading turnovers, paid up value, market capitalization and NEPSE
index were analyzed for the secondary market. His study on the securities market performance
revealed that there was no synchronization among different securities market performance indicators,
but it was true that they almost have depicted an erratic trend during the observed period. This
indicated the unstable and poor performance of securities market. Relative to the overall economy,
the size of securities market was very small and the liquidity of securities was also poor. The study
suggested that the Nepalese capital market was passing through a bearish situation. The growth and
performance of Nepalese securities market was not satisfactory though it was improving gradually.

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(Baral and Shrestha, 2006) conducted a research on Daily Stock Price Behavior of Commercial
Banks in Nepal. This study examines the stock price behavior of listed commercial banks by using
the daily price movements of commercial banks sampled randomly in the fiscal year 2005/06.
Observations of daily stock prices of sampled banks indicate that there is a large variation in their
stock prices in the fiscal year 2005/06. They are not doing well in Nepalese stock market. Most of

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the serial coefficients are significantly deviated from zero and statistically insignificant. It signifies
that the successive price changes are dependent. Therefore, the Nepalese stock market is inefficient
in pricing the shares. Runs test results also show that the percentage of deviation between the

observed and actual number of runs in the series of price changes is significant. It is obvious that the

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successive price changes are not random. Thus, RWH does not hold true in the context of Nepalese

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stock market.

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(Nepali Times, January 2008) published an article on the Stock Investment Behavior in Nepal.

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The article stated that the problems at the NEPSE are twofold. The first is that it is basically an

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extension of the casino, with people speculating rather than investing wisely. The other is that the

volume of stocks is too low. Globally, the development of stock markets has only worked well when

guided by institutional investors rather than individuals. In Nepal we have individual investors, led

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by some rogue insiders, who have turned it into a punters den. The stock exchange has been

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relegated to a racecourse, with betting dependent on the alcohol content in ones blood rather than

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rational thinking by ones brain. It also states that the NRB should regulate the market and the

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financial sector as an ongoing exercise, not just a reaction to the latest problem. It is vital that the

financial sector is seen to be stable if the country is to build credibility as a place to invest in. The
business sector also needs to pull up its socks. Corporate governance should be a way of life if

Nepali companies are to compete in the global arena. Relying on insider trading or dodgy legislation

will not work in the long run. Looking ahead, the stock exchange must provide the necessary
avenues to assist in funding Nepals economic growth, but this must be based on sound international

practices. The article provides following suggestions: Make trading paperless to reduce speculation,
Give the regulators stronger ongoing powers, Give favorable tax breaks to mutual funds and
institutional investors so that individuals go through them instead of trading directly in the market,
Acknowledge that stock investment is a long-term game and not a short-term gamble, and accept that
decent returns will only occur if the market is health.

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2.3 Review of Masters Thesis
We can easily find numerous studies conducted for the partial fulfillment of master's Degree. But we
can't review all the studies. So some of them, which studies are relevant to this study, are reviewed in
the following way.
(Gurung,1999) studied Share Price Behavior of Listed Companies in Nepal applies statistical

main objectives of the study are:


To provide the conceptual glimpses of capital market.

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To analyze the trends in paid value and market capitalization.

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To evaluate the trend of trading turnover.

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To analyze the behavior of NEPSE index.

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To identify the market behavior in Nepal.

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To analyze the share price behavior of listed companies.

The major findings of the study are:

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tools like percentage, correlation coefficient, bar graphs and line charts for analytical purpose. The

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The correlation coefficient of 0.97 between the number of traded and listed companies is

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significant, where as it is negative in trading group and perfectly positive in the case of

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banking group.

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The market capitalization value is in erratic trend in every group in each year. The proportion
of market capitalization of banking group is the highest amongst six groups.

During the study, the number of transactions in banking group is the highest, whereas it is
lower in other groups. Hence, the investment on banking group is highly attractive and liquid.
The prices of shares are fluctuating during the study period.

The capital market in Nepal was bullish in the initial periods but it turned bearish in the

successive year. In the initial period, share prices, trading turnovers, market index as well as
earnings have positively moved except market capitalization, but they have negatively moved
in the subsequent years. Thus, now the capital market is passing through the bearish trend in
Nepal. There is a lack of investors opportunities and the economy is passing through the
recession year by year.

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(Shrestha, 1999) studied A Study on Stock Prices Behavior in Nepal was conducted with the
following main objectives:
To examine the efficiency of the stock market of Nepal
To examine the serial correlation of successive daily price changes of the individual stocks.

series of random number expected under the independent Bernoulli process.

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To determine whether the sequence of price changes are consistent with the changes of the

To determine the efficiency of the stock market through the theoretical model of Efficient
Market Hypothesis in the stock market.

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The major findings of the study on the basis of serial correlation and run test are:

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The price changes of the past and present can be very helpful to forecast future price changes.

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Therefore, there exists the sufficient amount of opportunities for the sophisticated investors.

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When log days increases, the mean value of serial correlation of coefficient is lower, that

indicates that the past price changes may have low power to predict the future price changes

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in the long run.

The price changes in the present and future stock market may not be

independent of the

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price changes in the past and present respectively.

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There exist no profitable trading rules to make greater profit than they would make under the

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buy-and-hold strategy in their speculation through the information on past price changes

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Nepal stock market is not efficient in pricing shares.

(Paudel, 2001) studied A Study on Share Price Movements of Joint Venture Commercial Banks in

Nepal is undertaken by using financial and statistical tools (standard deviation, correlation, beta, ttest, etc). The major objectives of the study are:

To examine Nepal Stock Exchange Market and to judge whether the market shares of
different banking indicators (book value per share and major financial ratio) explain the share
price movements.

To analyze the scenario why the shares of selected banks emerge as blue-chips to the
potential investors and to make a conclusion on the basis of financial ratios analysis.
To examine how risky the investments in commercial banks shares are.

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The main findings of the study are:
The market share and the growth rates of different banking indicators used are not captured
by the market shares of these banks.
The ordinary least square equation of book value per share on market value per share reveals
that the independent variable does not fully explain the dependent variable on the basis of the

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above mentioned two points; Nepal Stock Exchange operates in a weak form of efficient
market hypothesis, indicating that the market prices move randomly. The market value per
share does not accommodate all the available historical information.

Having good track record of the financial position, the market potential investors buy the

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banks emerge as blue-chip in the Nepalese stock market.

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shares of joint venture commercial banks. Therefore, the shares of joint venture commercial

The beta coefficient, which measures the riskiness of individual security in relative term,

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suggests that none of the shares of eight sampled banks are risky. Therefore, even a risk

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averter can go for making an investment in shares of these banks. The shares of publicly

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quoted joint venture commercial banks are less risky as compared to other average stocks
traded in the stock exchange.

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(Gautam, 2005) conducted a research on A Study on the Behavior of Stock Market Price in
Nepalese Security Market. The main objectives of the research was to examine and study the price
trend with the help of NEPSE index, volume of stock traded, impact of signaling factors on NEPSE,
to find the correlation coefficient and regression analysis between the sampled companies and to
analyze the closing market price of the sampled companies.

The major findings of the study were as follows: The price trend of the sampled companies was not

in a predictable trend and the volume of the stock traded was in a fluctuating trend during the study
period. The relationship between EPS and DPS and EPS and NWPS was positive. The regression
analysis between the EPS and market price showed that all sample companies had positive regression
coefficient which indicated that the price would increase at an average rate. The major signaling
factors such as closure of major industries, closure of multinational companies and political

demonstrations of four political parties played a major role in determining the NEPSE index. Gautam
recommended formulating Investors Protection Act to remove difficulties such as transaction
facilities in the stock market. She also stressed on the need of adopting one window policy to provide
all services while granting approval.

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(Baniya, 2008) conducted a research on Share Price Behavior of Commercial Banks and Effect of
Macroeconomic Variables in Nepalese Stock Market. The specific objectives of the study were to
study and analyses stock price trend and behavior of the selected commercial banks; draw the main
influencing factors of share price and to examine the impacts of GDP, rate of interest and rate of
inflation on NEPSE Index. This study covered the period from FY 2001/02 to FY 2005/06. The

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researcher used monthly closing price of five commercial banks for analysis. Similarly, to establish
the relationship between the NEPSE index and the macroeconomic variables GDP, rate of interest
and rate of inflation during the study period were taken. The research used regression analysis to see

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the effect of macro-economic variables on the NEPSE.

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The major findings of this study were as follows: The graphical analysis and volatility test showed
that stock price behavior of sample commercial banks was not even, some showed fluctuating trend

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whereas other showed moderate trend. The results of run test showed market price of selected

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commercial banks were not random which indicated that market overreacted to the available

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information. There was no significant relationship between GDP and NEPSE

Which indicated that higher annual NEPSE index did not have positive relationship with GDP.

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Similarly there was no supporting evidence to prove that the change in the market interest rate on

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deposit could have affected the NEPSE Index. The degree of impact in stock price due to the change

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in interest rate was conditional on corporate environment. If the corporate environment was bright

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enough the fall in the market interest on deposit increased the security price in the stock market and
vice-versa. The trend of NEPSE index and the rate of inflation was not supporting with each other

which proved that there was no significant relationship between NEPSE index and the rate of
inflation. Finally, the study concluded that NEPSE was not influenced by macro economic variables.

2.4 Research Gap

The review of past studies shows that similar research on the share price behavior has been
conducted by different researchers in the past. The review shows that most of the studies were
focused on different listed companies and not particularly on the commercial banks. Few researches
which focused on the share price behavior of the commercial banks have tried to analyze the banking
share price comparing it with its own financial indicators and with macroeconomic variables.
Moreover, the review also statistical tools such as correlation coefficient and regression analysis
have often been used in most of these studies. Most of the thesis has taken sample of few commercial

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banks. Keeping in view the above research gap, this research has analyzed the share price behavior
of the 15 commercial banks has been used as sample banks. This thesis also presents the view of 25

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respondents through questionnaire containing 12 sets of questions.

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CHAPTER III
RESEARCH METHODOLOGY

3.1 Introduction

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Research methodology refers to the various sequential steps that are to be adopted by researchers
during the course of studying a problem with certain objectives. It tends to solve the search problem
in a systematic way. Hence, overall research method adopted by the researcher is mentioned. It

covers quantitative methodologies in a greater extent and also uses the descriptive part based on both

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designed quantitative and qualitative research in a very clear and direct way using both financial and

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statistical tools. The purpose, hypothesis or research question and format are covered in this research.

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3.2 research design

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Research design refers to the definite procedure and techniques which guides to study and provide

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ways for research viability. It is arrangements for collection and analysis of data.

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A plan of study or blue print for study that presents a series of guide posts to enable the researcher to

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progress in the right direction in order to achieve the goal is called a research design or strategy

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The main objective of this study is to examine the interrelation of MPS with BPS, EPS, DPS and

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other financial indicators. To achieve this objective, both the analytical and descriptive research
design have been adopted to examine facts and descriptive techniques have been used to determine
factors determining stock price of commercial banks in the NEPSE.

3.3 Population and Sample

All companies listed with the Nepal Stock Exchange are considered to be the population of the study
and the commercial banks listed and conducting share transactions in the NEPSE are taken as the

sample of the study. At present there are 26 commercial banks listed with the NEPSE out of which
following fifteen commercial banks are randomly selected for our analysis purpose.

1. Bank of Kathmandu
2. Everest Bank Limited

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3. Himalayan Bank Limited
4. Kumari bank Limited
5. Laxmi Bank Limited
6. Lumbini Bank Limited
7. Machhapuchhre Bank Limited

9. Nepal Credit and Commerce Bank Limited


10. Nepal Bangladesh Bank Limited
11. Nepal Industrial and Commercial Bank Limited

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12. Nepal Investment Bank Limited

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13. Nepal SBI Bank Limited


14. Siddhartha Bank Limited

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15. Standard Chartered Bank Limited

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8. Nabil Bank Limited

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As this study will try to explore the objectives set in the previous chapter, it is expected that this
study will help analyze individual commercial banks performance in relation to that of the similar

other businesses. This study is also aimed at producing tested effect of historical information on

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future price movements. Therefore, interested groups like the stock analyst, financial analyst, stock-

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brokers, and managers of the different companies as well as individuals can use the findings of this

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study. This study covers these Commercial Banks:

3.4 Sources of Data

For the effective and efficient findings, both Primary and Secondary data has been collected as

source of data. For the purpose of Primary Data, a questionnaire was presented to the 25 respondents
were from the NEPSE courtyard that have either invested in share or willing to invest in share soon.
The secondary data are collected from different sources of related companies and organizations as
follows:
The year-ended equity share data sheet showing MPS, BPS, EPS, DPS, Balance Sheet Profit
and Loss a/c etc.
Information relevant to study available in various wet-sites.
Previous thesis and studies
Relevant books, journals, magazines, reports, bulletins, etc.

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3.5 Data Collection Techniques
As the study is based on primary and secondary data, Primary data has been collected through
questionnaire distributed to the respondents and the response has been collected from the
respondents duly filled and For the collection of secondary data, the official website of Nepal Stock
Exchange, www.nepalstock.com was visited from where the financial reports of the concerned

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companies and other relevant information were taken. Likewise, the website of Nepal Rastra Bank,
www.nrb.org.np was visited and required data was downloaded. The financial statements of the
concerned organizations ate taken from the library of Security Board of Nepal, NEPSE and the share
department of respective banks.

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3.6 Data Processing

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Firstly, data gathered from the various sources have been verified and simplified for the purpose of

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analysis. Then it has arranged and presented in a systematic way. Moreover, it has been checked,

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edited and tabulated in such a way that provides convenience for further computation and
interpretation.

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The relevant data have been inserted in meaningful tables. Only the data that are relevant to the study

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have been presented in the tabular form in the understandable way and unnecessary data have been

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made to clarify the tabulated data in systematic way. An attempt has been made to find out the

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conclusion from the available data, with the help of various financial as well as statistical tools.

3.7 Data Analysis Tools

Several tools and techniques are used to analyze the Primary and Secondary data collected from
various source for obtaining the conclusion. The following financial as well as statistical tools have
been used to analyze the data:

3.7.1 Statistical Tools


Statistical tools measure the data and give the result in numeric form which helps to analyze the data
in logical way. The following statistical tools have been used in this study.

3.7.1.1 Average/ Mean

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Average, in general, is calculated by adding all the numbers of all observations and dividing by the
total number of observations. It is in fact, a value which is represented to stand for whole group of
which it is part, as typical of all the value in the group.
X

Mean =

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3.7.1.2 Standard Deviation


The standard deviation () is another measure of investment risk. It is absolute measures of
dispersion. The smaller the standard deviation the lower will be the degree of risk of the stock. In

other words, a small standard deviation means a high degree of uniformity of the observation as well

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as homogeneity of a series and vice versa. The formula for calculating the standard deviation is:

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X )2

(X
n

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Where,

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Standard Deviation
Number in X-series

Mean

Number of Observations in a sample

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3.7.1.3 Coefficient of Variance

The coefficient variation (CV) is the other useful measure of risk. It is the standard
Deviation divided by the expected return, which measures risk per unit of return. It provides a

more meaningful basis for comparison when the expected returns on two alternatives are not the

same. If investors believe that the rate of return should increase as the risk increase, then the

coefficient of variation provides a quick summary of the relative trade-off between expected

return and risk.


CV

Where,

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CV

Coefficient of Variation

Mean
=

Standard Deviation

3.7.1.4 Correlation Coefficient

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Correlation may be defined as the degree of linear relationship existing between two or more
variables. Two variables are said to be correlated is accompanied by the change of another variable.

If the increase (decrease) in the value of one variable on an average is associated with the increase
(decrease) in the value of another variable, positive relationship is said to be existed. The relationship

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will be negative if increased (decreased) in the variable of one variable is associated with the

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decreased (increased) in the value of another variable. But the correlation coefficient always remains
with in the limit of +1 to -1. By Karl Pearson, the simple correlation coefficient (between two

X2

X )( Y )

X )2

Y2

Correlation between X and Y

Number of observations in series X and Y

Sum of observations in series X

Sum of observations in series Y

Y2

XY :

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( Y )2

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Where,

XY

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variables say X and Y) is given by:

Sum of square observations in series X


Sum of squared observations in series Y

Sum of product of observations in series X and Y

3.7.1.5 Coefficient of Determination

The coefficient of determination gives the percentage variation in the dependant variable that is
accounted for by the dependant variable/s. In other words, the coefficient of determination gives the
ratio of expected variance to the total variance. The coefficient of determination is given by the
square of the correlation coefficient, i.e. r 2
So the coefficient of determination = Square of correlation = (r2)

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3.7.1.6 Regression Analysis:
Simple Regression Analysis
Regression is the estimation of unknown values or prediction of one variable from known values of
other variables. It is a mathematical measure of the average relationship between two or more
variables in term of the original units of the data. The known value which is used for prediction (or

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estimation) is called independent (or regression or predictor or explanatory) variables and the
unknown value that we are going to predict is called dependent (or regressed, predicted or explained)
variable.

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Line of Regression of X on Y

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The line of regression of X on Y is the line which gives the best estimates of X for any given amount

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of Y. The regression equation is expressed as:

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Y = a + bx

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We shall get the normal equation for estimating a and b as:


Y = na + b x.(i)

XY= a X + b x2 (ii)

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Where, Y = the value of dependent variable,

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a = Y intercept

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b = Slope of the trend line/ coefficient of regression

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X = Value of independent variable

3.7.1.7 Coefficient of Regression

The coefficient b which is the slope of line of regression of Y on X is called the coefficient of
regression of Y on X. it represents the increment in the value of the dependent variable Y for a unit

change the value in value of the independent variable X in other words, it represents the rate of
change. The convenient way to calculate the value of b is as:
b

n
n

XY X

( X) 2

Similarly, the value of Y-intercept can be computed as:


a

( X 2 ) ( Y) - ( X) ( XY)
n

X2

( X) 2

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Multiple Regression Analysis
Multiple regression analysis consists of two or more independent variables. It derives an equation
which provides estimates of the dependent variable from values of the two or more independent
variables. It obtains a measure of the proportion of variance in the dependent variable which is
explained by the independent variable and a measure of error involved in using the regression

dependent variable.

The multiple regression equation of x1 on x2 and x3 is given below:

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x1=a1+b1x2+b2x3 .(i)

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X1 = na1+b1 x2+b2 x3 . (ii)


x1x2=a1 x2+b x22+b2 x2x3(iii)

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Where,

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x1x3 = a1 x3+b1 x2x3+b2 x23 .(iv)

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X1 = dependent variable
X2 and X3 = Independent variables

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a1 = value of X1 when X2 and X3 equals to zero.

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b1 = Partial regression coefficient of X1 on X2 when X3 is constant


b2 = Partial regression coefficient of X1 on X3 when X2 is constant

3.7.1.8 T-Test

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(i.e. amount of change in X1 per unit change in X3, holding X2 constant)

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equation as a basic for estimation using this regression equation as a basic for estimation of the

T-test, commonly known as Students T- Distribution, is used when sample size is equal to or less
than 30, the parent population from which the sample is drawn is normal, the population standard

deviation is unknown. In order to test the significance of an observed sample correlation coefficient,
the following procedure has been applied:

The following formula is used to test an observed sample correlation coefficient:

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r

r
1 r2

( n 2)

Where,
r = simple correlation coefficient

3.8 Methods of Data Presentation

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n = number of observations

The collected data are presented in simple and easily understandable tables. To make those data clear

and more informative such data have been presented in figures like trend line and pie-chart

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whichever is relevant to explain the data more effectively, based on the nature of data. After

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presenting such data is the tables and figures, are analyzed using various statistical, mathematical and

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financial tools and technique.

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CHAPTER IV
DATA PRESENTATION AND ANALYSIS

4.1 Introduction

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This chapter deals with data presentation, analysis and interpretation following the research
methodology presented in the third chapter. Data presentation and analysis are the central steps of the
study. The main purpose of this chapter is to analyze and elucidate the collected data to achieve the

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presentation. The chapter deals with the main body of the study.

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objective of the study following the conversion of unprocessed data to an understandable

Data presentation is the interpretation of the study. Data analysis summarizes the collected data and

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its interpretation presents the major findings of the study. Analysis is not complete without

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interpretation and interpretation cannot proceed without analysis. In this course of analysis, data

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gathered from various sources have been inserted in the tabular form and shown in diagram form.

The data have been analyzed by using statistical tools. The results of the computation have also been

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summarized in appropriated tables.

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4.2 Listing of Commercial Banks in NEPSE

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All the Commercial Banks of Nepal are listed in NEPSE for share transaction under Group A. This

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classification is made as per the provision of Securities Listing Bye-Laws, 1996 and listing is done
according to their profit track record for the last three years, book value and paid up value ratio,

financial strength are the basis of their classification. The criteria for the classification of the listed
companies in Group A as per Listing Bye-Laws 1996 are given below:

1. The paid-up capital of the company must be at least Rs.20 million


2. The number of equity shareholder must be at least1000
3. The company must have made the public floatation as per bye-laws 9 (ka) sub-byelaws (4).
4. The company must be in profit since last three years.
5. The book value of the share should not be less than its paid up value.

6. Submission of the financial statement within six months from the closure of the fiscal year is
required.

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The company failed to meet above subjected to either de-listed from the list of NEPSE or degrade it
into the Group B.

4.3 Annual Trend Analysis of NEPSE Index and Banking Index


In this study, index has been used as measuring tool to determine whether the performance of stock

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market is remarkable or not. It focuses on the price of stocks that is increasing or decreasing in the
market due to the various changing variables. Higher index implies the increase in market price of
securities and the better performance of companies and vice versa.

ib
ra

ry

The following table shows the annual trend analysis of the NEPSE Index and Banking Index.

NEPSE Index

% Change

2003/04

222.04

2004/05

286.67

29.11

2005/06

386.83

2006/07

683.95

2007/08

963.36

2008/09

749.10

Banking Index

304.64

31.33

34.94

437.49

43.61

76.81

789.21

80.39

40.85

985.65

24.89

(22.24)

780.87

(20.78)

Ca
m

pu

ev

rD

% Change

231.97

(Source: Annual Reports of NEPSE)

Sh
an

ke

Fiscal Year

sL

Table: 4.1
Annual Trend Analysis of NEPSE Index and Banking Index

The above table shows the movement of NEPSE Index and Banking Index during the FY 03/04 to
FY 08/09. The NEPSE Index shows an increasing trend except in FY 08/09 when it dropped from
963.36 in FY 07/08 to 749.10 in the FY 08/09. It shows
that the market demonstrated a bullish trend till 07/08 but showed a bearish trend in FY 08/09.

Similarly, the Banking Index also shows an increasing trend except in the FY 08/09 when it dropped
from 985.65 in FY 07/08 to 780.87 in FY 08/09. The Banking Index followed an increasing trend
from FY 03/04 and reached up-to 985.65 in the FY 07/08. The Banking Index also showed a bearish
trend in 08/09 but in overall showed a bullish trend during the study period.

Both the NEPSE and Banking Index has grown in an increasing number during the study period
which shows satisfactory performance of the public limited companies listed in the stock exchanges

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including the commercial banks. The growth rate of the commercial banks is more than that of the
NEPSE which indicates better performance of the commercial banks in comparison to the other
public limited companies listed in the NEPSE. This trend also implies recovery economy in the
country.

1000

Index

800
NEPSE Index

600

ry

Banking Index

ib
ra

400

sL

200

pu

Ca
m

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09


Fiscal Year

rD

ev

Figure No.1: Annual Trend Analysis of NEPSE Index and Banking Index

ke

4.4 Relationship between EPS, DPS and BPS to MPS

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1200

Sh
an

The relationship of EPS, DPS and BPS with MPS is determined separately to each of the sampled
listed companies in this section. For their analytical purpose, the Market Price of Share (MPS) is

assumed to be influence with the fluctuation occurred in EPS, DPS and BPS. Hence, MPS is taken as
dependent variable whereas EPS, DPS and BPS are taken as independent variable. The correlation
analysis is performed to determine the relationship of EPS, DPS and BPS with MPS. To determine

the effect of DPS, EPS, and BPS on MPS, simple correlation as well as their coefficient of

determination are calculated. For the test of hypothesis of simple and multiple coefficients,

calculated t-value is compared with the tabulated t-value at 95% level of significance. To determine
the magnitude of the effects of the independent variables to the dependent variable, simple and
multiple regression analysis are made and the magnitude is identified after determining the
regression equations. In addition to that, multiple correlation coefficient, multiple coefficient of
determination, standard errors of estimate are analyzed during the correlation and regression
analysis.

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4.5 Analysis of Financial Indicators
4.5.1 Bank of Kathmandu
The table given below (Table: 4.2) shows the financial summary of Bank of Kathmandu over the last

relationship.
Table: 4.2
Summary of the Financial Performance of BOK
MPS

DPS

BPS

EPS

2003/04

295

10

229.09

27.50

2004/05

430

15

171.83

2005/06

850

48

2006/07

1375

20

2007/08

2350

42.11

2008/09

1825

47.37

Total

7125

Mean

1187.5

SD

739.05

CV

62.24

sL

ib
ra

43.07

218.38

43.50

213.60

59.94

230.67

54.68

182.48

1234.73

258.79

30.41

205.79

43.13

15.79

19.02

11.76

51.92

9.24

27.26

ev

Ca
m

pu

192.52

ke

rD

30.10

(Source: Annual Reports of BOK)

Sh
an

Where,

ry

Fiscal Year

SD

: Standard Deviation

CV :

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six years and the relationship of EPS, DPS and BPS to MPS along with the significance of such

Coefficient of Variation

The Above table presents the detail financial summary of Bank of Kathmandu throughout the last six
years. As table shows, the bank distributed its profit to the shareholders as dividend for six times
over the study period. It distributed Rs.10 per share on 2003/04 as dividend and it was increasing

order at every year. Since the company distributed more dividends in the last year, it shows that the
company is in better financial strength in the later years. It can be seen in table that the Book Value
per Share of the company first decreases and increases gradually thereafter. The EPS of the Bank
also in increasing trend but is decreased in fiscal year 2008/09.

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The distribution of dividend seems to be much volatile for the company with the coefficient of
variation 51.92% whereas the Book value per share seems to be less volatile with the coefficient of
variation 9.24%.The market Price per Share and Earning per Share moderately volatile with the
coefficient of variation 62.24% and 27.26% respectively. It tends to describe that DPS is

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comparatively more fluctuated than others.

The industry average of CV of MPS, BPS, DPS and EPS calculated by computer software equals to
39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that MPS, DPS and EPS of this
bank have higher degree of CV than that of industry. It means they are more volatile in than average

ib
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ry

banks. But BPS of this bank seems to be less volatile than that of industry average.

The following line chart (Figure No. 2) shows the linear relationship of Market Price per Share with

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sL

BPS, DPS and EPS.

Ca
m

Relationship of MPS, DPS, BPS and EPS

ev

2500

rD

2000

500

DPS
BPS

Sh
an

1000

MPS

ke

1500

EPS

0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

Figure No.2: Relationship between MPS, DPS, BPS and EPS of BOK

The relation of MPS with BPS, DPS and EPS has been presented in the following table (Table No.
4.3):

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Table: 4.3
Relationship of BPS, EPS and DPS with MPS of BOK
Variables

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

0.663

0.439

238.604

31.2

1.771

2.776

Insignificant

MPS vs. BPS

0.662

0.437

-4107.43

25.723

1.766

2.776

Insignificant

MPS vs. EPS

0.974

0.949

-1452.16

61.208

8.598

2.776

Significant

Where,

: Coefficient of Correlation
2

t-cal

Coefficient of Determination

: Students t-value

ry

ib
ra

t-table : Tabulated value of Students t- distribution (at 95% level of

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Significance, n-2 i.e.6-2=4 Degree of Freedom)

pu

a-value : Y-intercept of Regression equation (MPS- dependent intercept)

Ca
m

b-value: Slope of the line (Variable Intercept)

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(Researchers Analysis)

Table No 4.3 shows the relation of MPS with DPS, BPS and EPS. It shows that MPS is positively

ev

correlated with DPS, BPS and EPS. It means rise in these indicators (DPS, BPS and EPS) results the

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rise in MPS. Among these three indicators, Earning per Share seems to be high degree of positively

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correlation with the Market Price per share. Likewise, Dividend per Share is positively correlated

Sh
an

second to MPS. BPS is less correlated with MPS in comparison with others. Hence, a little rise in
book value i.e. Market Capitalization cause bigger increase in MPS. Though in smaller amount, the

increase in DPS and EPS also increases MPS. T-value of correlation with these indicators indicates
that degree of correlation is significant at 95% level of confidence for EPS whereas insignificant for
BPS and DPS.

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given
in Table No. 4.4.

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Table: 4.4
Simple Regression Equation of BOK
S.N.

Variables

Regression Equation

MPS vs. DPS

MPS = 31.2 DPS + 238.604

MPS vs. BPS

MPS = 25.723 BPS 4107.43

MPS vs. EPS

MPS = 61.208 EPS 1452.16

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(Researchers Analysis)

The first equation is the regression equation of MPS on DPS. The regression constant equals to
238.604. This means that when DPS falls to zero, MPS equals to Rs. 238.604. Likewise, the constant

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for DPS equals to 31.2 meaning that when DPS increases/ decreases by Rs.1, MPS increases

sL

/decreases by Rs. 31.2 and vice versa.

pu

The second equation refers to the regression equation of MPS on BPS. The regression constant

equals to -4107.43. This means that when BPS becomes zero, MPS will fall to Rs.-4107.43.

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m

Likewise; the constant for BPS equals to 25.723 meaning that when DPS increases/decreases by

ev

Rs.1, MPS increases/ decreases by Rs.25.723 and vice versa.

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In the same way the last equation indicates the regression equation of MPS on EPS. The regression

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constant equals to -1452.16. This means that when EPS falls to zero, MPS equals to Rs.-1452.16.

Sh
an

Likewise, the constant for EPS equals to 61.208 meaning that when DPS increases/ decreases by
Rs.1, MPS increases/ decreases by Rs. 61.208 and vice versa.

The Multiple Regression equation of MPS of Bank of Kathmandu on DPS and EPS is represented
by the following equation.

MPS on DPS and EPS


MPS = 403.82 + 16.19 DPS + 8.82 EPS

The above equation gives the result on MPS due to the joint effect on DPS and EPS, MPS intercept
i.e. multiple regressions constant as shown in the equation equals to 403.82. It implies that when
DPS and EPS becomes zero, MPS would be equal to Rs.403.82. The constant for DPS is 16.19
meaning that when DPS increases by Re.1, MPS will increase by Rs.16.19 keeping EPS constant. In

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the same way, if DPS holds constant and EPS increased by Re.1, MPS will increase by Rs.8.82 and
vice versa.

4.5.2 Everest Bank Limited


The financial performance of Everest Bank Ltd. for the past six years has been summarized in the

significance.

Table: 4.5
MPS

DPS

2003/04

680

2004/05

870

20

2005/06

1379

2006/07

2430

30

2007/08

3132

2008/09

2455

Total

10946

Mean

1824.33

Where,
SD

EPS

45.58

219.87

54.22

217.67

62.78

280.82

78.42

30

321.77

91.82

30

313.64

99.99

110

1525.29

432.81

18.33

254.22

72.14

8.28

55.04

19.65

45.17

21.64

27.24

pu

sL

171.52

Ca
m

ev

rD
49.50

Sh
an

CV

903.06

ke

SD

BPS

ib
ra

Year

ry

Summary of the Financial Performance of EBL

(Source: Annual Reports of EBL)

: Standard Deviation

CV :

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following table. It tends to show the relationship of EPS, DPS and BPS to MPS along with their

Coefficient of Variation

The above table (Table No.4.5) presents the summary of financial performance of Everest Bank

Limited for the last six years. From the table, it can be revealed that the bank has not consistent
figure over the period. The MPS has been increased first and then decreased at last. The MPS as well
as EPS seems to be in increasing order in the later years. The bank has distributed dividend only four
times within this period at Rs.20 and the similar rate of Rs.30 per share. High coefficient of
covariance (49.50%) of MPS clears that the DPS distribution is highly volatile and inconsistent. In
comparison with DPS, MPS, BPS and EPS possess low degree of Coefficient of Variance.

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The industry average of CV of MPS, BPS, DPS and EPS calculated by computer software equals to
39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that MPS, DPS and EPS of this
bank have higher degree of CV than that of industry. It means they are more volatile in than average
banks. But BPS of this bank seems to be less volatile than that of industry average.

BPS, DPS and EPS.

Relationship of MPS, DPS, BPS and EPS

ry

3500

ib
ra

3000
2500

MPS
DPS

sL

2000

BPS
EPS

pu

1500
1000

Ca
m

500
0
2004/05

2005/06

2006/07

2007/08

2008/09

ev

2003/04

rD

Fiscal Year

ke

Figure No.3: Relationship between MPS, DPS, BPS and EPS of EBL

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The following line chart (Figure No.3) shows the linear relationship of Market Price per Share with

Sh
an

The relation of MPS with BPS, DPS and EPS has been presented in the following table (Table
No.4.6):

Table: 4.6

Relationship of BPS, EPS and DPS with MPS of EBL


Variables

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

-0.2186

0.0478

788.5

-7.550

-0.448

2.776

insignificant

MPS vs. BPS

0.7718

0.5957

-774.62

8.447

2.4275

2.776

Insignificant

MPS vs. EPS

0.9144

0.8361

-287.13

239417

4.5170

2.776

Insignificant

(Researchers Analysis)

Table No. 4.6 shows the relation of MPS with DPS, BPS and EPS. It shows that MPS is negatively
correlated (-0.2186) with DPS whereas positively correlated with BPS (0.7718) and EPS (0.9144).

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Its means that if the DPS rises by Rs.100, MPS falls by Rs.21.86 similarly, Rs.100 change in BPS
and EPS will fluctuate MPS in the same direction by Rs.77.81 and 91.44 in this way, EPS are most
correlated with MPS then others. But it can be observed from t-calculation that none of these
correlations is significant at 95% level of confidence. The coefficient of determination shows that
4.81% of change in MPS is explained by DPS whereas 59.57% and 83.61% is explained by BPS and

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EPS respectively.

The simple regression equation of DPS, BPS and EPS as dependent variable is given in table
No.4.7:

Simple Regression Equation of EBL


Regression Equation

MPS vs. DPS

MPS = -7.55 DPS + 788.50

MPS vs. BPS

MPS = 8.45 BPS - 774.62

MPS vs. EPS

MPS = 23.94 EPS - 287.13

pu

sL

ib
ra

Variables

Ca
m

S.N.

ry

Table: 4.7

(Researchers Analysis)

The first equation is the regression equation of MPS on DPS. The regression constant equals to

ev

788.50. This means that when DPS is zero, MPS equals to RS 788.50. Like wise, the constant for

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DPS equal to -7.55, meaning that when DPS increases by 7.55, MPS decreases by Rs.7.55 and vice

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an

ke

versa.

The second equation refers to the regression equation of MPS on BPS. The regression constant

equals to -744.62. This means that when BPS became zero, MPS will fall to Rs.744.62 like wise, the

constant for DPS equal to 8.45 means when BPS increases/decreases by Re. 1, MPS
increases/decreases by Rs.8.45 and vice versa.

Likewise, the last equation indicates the regression equation of MPS on EPS. The regression

constant equal to -287.13.this means that when EPS fall to zero, MPS equal to Rs.-287.13.in the
same way, the constant for EPS equals to 23.94 meaning that when DPS increases/decreases by Re.
1, MPS increases/decreases by Rs.23.94 and vice versa.

The Multiple Regression equation of MPS of Everest Bank Limited on DPS and EPS is represented
by the following equation.

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MPS on DPS and EPS

MPS = -239.95-8.894 DPS + 24.22 EPS

The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept

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i.e. multiple regressions constant as shown in the equation equals to -239.95. it implies that when
DPS and EPS become zero, MPS would be equal to -239.95. The constant for DPS is -8.894

meaning that when DPS increases by Re.1, MPS will decrease by Rs.8.894 keeping EPS constant. In
the same way, if DPS holds constant and EPS increases by Re.1, MPS will increases by Rs.24.22 and

4.5.3

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vice versa.

Himalayan Bank Limited

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The following table outlines the major financial performance of Himalayan Bank Limited over the

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past six years form 3003/04 to 2008/09.The relationship of MPS with DPS, BPS and EPS has been

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explained thereafter.

Table: 4.8

Summary of the Financial Performance of HBL


DPS

BPS

EPS

2003/04

840

20

244.33

49.05

31.58

239.59

47.91

1100

35

228.72

59.24

2006/07

1740

40

264.74

60.66

2007/08

1980

45

247.95

62.74

2008/09

1760

43.56

256.52

61.90

Total

8340

215.14

1481.85

341.5

Mean

1390

35.86

246.98

56.92

SD

450

7.70

11.56

6.0712

CV

32.37

21.47

48.68

10.67

Sh
an

2005/06

920

ke

2004/05

ev

MPS

rD

Fiscal Year

(Source: Annual Report of HBL)


Where,
SD

: Standard Deviation

CV

: Coefficient of Variation

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The above table (Table No.4.8) presents the summary of financial performance of Himalayan Bank
Limited for the last six years. From the table, it can be revealed that the performance of the bank was
lowered at mid term of study period. It means the data shows good financial performance first and
then it was declined at year end. But in the recent years it bans been improved. The DPS seems to be
in increasing order in the later years with out decrease in 2008/09. Among these four indicators, DPS

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has more Coefficient of Variance whereas BPS has the lowest one. Here, the low degree of
Coefficient of Variance of these indicators explains the more consistency of the banking
performance in comparison with other banks.

ry

The industry average of CV of MPS, BPS, DPS and EPS calculated by computer software equals to

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39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that this bank has less volatile MPS,

BPS, DPS and EPS in comparison with whole industry. Less volatility in these indicators of this

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bank implies more consistency in the financial performance.

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The following line chart shows the linear relationship of Market Price per Share with BPS, DPS and

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m

EPS (Figure No.4)

Relationship of MPS, DPS, BPS and EPS

ev

2500

rD

2000

MPS

ke

1500

DPS
BPS

Sh
an

1000
500

EPS

0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal year

Figure No.4: Relationship between MPS, DPS, BPS and EPS of HBL

The relation of MPS with BPS, DPS and EPS has been presented in the following table (Table No.
4.9):

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Table: 4.9
Variables

r2

t-cal

a-value

b-value

t-table

Remarks

MPS vs. DPS

0.743

0.552

9.2729

427.4275

28.0728

2.776

Significant

MPS vs. BPS

-0.46

0.220

-0.4238

2432.638

-8.8232

2.776

Insignificant

MPS vs. EPS

0.613

0.376

10.023

121.2980

11.7220

2.776

Significant

(Researchers Analysis)

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Relationship of BPS, EPS and DPS with MPS of HBL

The relation of MPS with DPS and EPS is shown in Table No. 4.9. It shows that MPS of Himalayan

Bank is positively correlated with DPS and EPS but negatively correlated with BPS. Both the

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correlation with DPS and EPS are significant but the correlation with BPS seems to be insignificant

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at 95% level of confidence. It indicates that raise in DPS and EPS results the rise in MPS and vice

versa. If DPS rise by Rs.100, the MPS will be raised by Rs.74.36. In the same way, Rs.100 increase

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in EPS results the increment of Rs.61.39 in MPS. Since BPS in negatively correlated with MPS, it

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fluctuates in the opposite way to that of DPS and EPS. If BPS increases by Rs.100, then the MPS

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will be decreased by Rs.46.92.

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The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given

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below (Table No.4.10):

Table: 4.10

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Regression Equation of HBL

Variables

Regression Equation

MPS vs. DPS

MPS=-7.55 DPS+788.50

MPS vs. BPS

MPS= 8.45 BPS -774.62

MPS vs. EPS

MPS= 23.94 EPS-287.13

2
3

Sh
an

S.N.

(Researchers Analysis)
The first equation is the regression equation of MPS on DPS. The regression constant equals to

427.43. This means that when DPS falls to zero, MPS equals to Rs.427.43. Likewise, the constant for
DPS equals to 8.72 implies that when DPS increases by Re.1, MPS increase Rs.8.72 an vice versa.

The second equation refers to the regression equation of MPS on BPS. The regression constant
equals to 2432.298. This means that when BPS becomes zero, MPS will be equals to Rs.2152.298.

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Likewise, the constant for BPS equals to -8.72 meaning that when DPS increases by Re.1, MPS
decreases by Rs.4.72 and vice versa.

In the same way the last equation indicates the regression equation of MPS on EPS. The regression
constant equals to 121.298. This means that when EPS falls to zero, MPS equals to Rs.121.298.

Re.1, MPS increases/ decreases by Rs.11.728 and vice versa.

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Likewise, the constant for EPS equals to 14.708 meaning that when DPS increases/ decreases by

The Multiple Regression equation of MPS of Himalayan Bank Limited on DPS and EPS is

ry

represented by the following equation.

ib
ra

MPS on DPS and EPS

pu

sL

MPS = 612.2367 + 8.22 DPS 0.068 EPS

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The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept

i.e. multiple regressions constant as shown in the equation equals to 312.2367. It implies that when

DPS and EPS becomes zero, MPS would be equal to Rs.612.2367. The constant for DPS is 8.22

ev

meaning that when DPS increase by Re.1, MPS will increases by Rs.8.22 keeping EPS constant. In

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the same way, the constant for EPS equals to -0.068 means if DPS holds constant and EPS increases

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an

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by Rs.1, MPS will decreases by Rs.0.068 and vice versa.

4.5.4 Kumari Bank Limited

The summarized form of financial performance of Kumari Bank Ltd. for the last six years has been
presented in the following table
Table: 4.11
Summary of the Financial Performance of KBL
Fiscal Year

MPS

DPS

BPS

EPS

2003/04

114

9.74

2004/05

269

141

17.58

2005/06

443

21.05

149

16.59

2006/07

830

21.05

137

22.70

2007/08

1005

10.53

128

16.35

2008/09

700

10.58

137

22.04

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Total

3247

63.21

806

105

Mean

541.167

10.54

134.33

17.5

SD

260.60

6.058

11

4.2824

CV

48.16

57.57

8.19

24.47

Where,
: Standard Deviation

CV

: Coefficient of Variation

ry

SD

Shanker Dev Campus Library

(Source: Annual Report of KBL)

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The table given above shows the financial performance of Kumari Bank for the past six years. The

market price per share of the organization is available only for the year 2004/05 and no data of the

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year 2008/09 is available because it is still not audited and hence not published out. The company

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didnt distribute any dividends within the first two years of study period. The average BPS of the

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company for the six years (excluding 2003/04 and 2008/090 is Rs.134.3 with the Standard Deviation
of 11%. The Coefficient of Variance equals to 24.47 which indicates the volatility of EPS is 24.47%.

The higher Standard Deviation of BPS in comparison with EPS denotes that BPS is more volatile

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than EPS.

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The industry average of CV of MPS, BPS, DPS and EPS calculated by computer equals to 39.44%,

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28.17%, 116.75% and 28.31% respectively. This shows that EPS of this bank has higher degree of
volatility than that of industry. But BPS of this bank seems to be less volatile than that of industry
average.

The following line chart shows the linear relationship of Market Price per Share with BPS, DPS and
EPS (Figure No.5)

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Relationship of MPS, DPS, BPS and EPS
1200
1000
800

MPS
DPS

600

BPS

200
0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

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ry

Figure No.5: Relationship between MPS, DPS, BPS and EPS of KBL

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4.5.5 Laxmi Bank Limited

Shanker Dev Campus Library

EPS

400

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The financial performance of Laxmi Bank Ltd. for the past sex years has been summarized in the
following table. It tends to show the relationship of EPS, DPS and BPS to MPS along with their

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significance.

Table: 4.12
DPS

BPS

EPS

101.28

1.9

285

98.87

4.34

2005/06

368

106.41

5.80

2006/07

690

115.66

10.75

2007/08

1113

20

125.45

16.45

2008/09

1062

122.24

20.70

Total

3654

25

504.06

59.94

Mean

612.34

4.17

168.02

10

SD

372.28

6.4753

3.14

6.73

CV

60.89

155.28

1.87

67.3

Sh
an

2004/05

156

ke

2003/04

MPS

rD

Fiscal Year

ev

Summary of the Financial Performance of LBL

(Source: Annual Report of LBL)


Where,
SD

: Standard Deviation

CV :

Coefficient of Variation

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The above table (Table No.4.12) reveals the summary of financial performance of Laxmi Bank Ltd.
for the last six years. The complete information of Laxmi Bank is available after 2003/04. Hence
here we have considered the data after 2003/04. The bank has not distributed any kind of dividend
yet except last two years. Hence, there is nothing to compare the relation of MPS with DPS. The
table shows that the MPS is in increasing order since 2003/04 to till 2007/08. Likewise, the EPS is

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also in increasing trend in the later years. The coefficient of variance of MPS, BPS and EPS is
60.89%, 155.28% and 67.23% respectively. In comparison with other indicators the Coefficient of
Variance of DPS is higher than others, which shows that it is more volatile than others. In this way,
the data shows that BPS has the lowest degree of Coefficient of Covariance.

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The industry average of CV of MPS, BPS, DPS and EPS calculated by computer equals to 39.44%,

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28.17%, 116.75% and 28.31% respectively. This shows that EPS of this bank have higher degree of

CV than that of industry. It means they are more volatile in than average banks. But MPS and BPS of

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this bank seems to be less volatile than that of industry average.

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The following line chart (Figure No. 6) shows the linear relationship of Market Price per Share with

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BPS, DPS and EPS.

ev

Relationship of MPS, DPS, BPS and EPS

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1200

MPS

Sh
an

800

ke

1000

DPS

600

BPS
EPS

400
200

0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

Figure No.6: Relationship between MPS, DPS, BPS and EPS of LBL

The relation of MPS with BPS, DPS and EPS has been presented in the following table (Table No.
4.13):

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Table: 4.13
Variables

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

MPS vs. BPS

0.5678

0.3224

-2380.71

15.77

1.38

2.776

Insignificant

MPS vs. EPS

0.9998

0.9996

74.16

54.20

102.83

2.776

Significant

(Researchers Analysis)

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Relationship of BPS, EPS and DPS with MPS of LBL

Table No. 4.13 shows the relation of MPS with BPS and EPS. The relation between MPS and DPS is

not calculated because no DPS has distributed yet it shows that MPS is positively correlated

ry

(0.05678) but insignificant at 95% level of confidence with BPS. Likewise, MPS is positively

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correlated with EPS (0.9998) and highly significant at 95% level of confidence. It means that if the

BPS rises by Rs.100, MPS will be raised by Rs.56.78. The MPS and EPS are almost perfectly

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correlated i.e. (0.9998) hence MPS will increase/ decreases in the same direction with almost equal

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whereas 99.96% is explained by EPS respectively.

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value. The coefficient of determination shows that 32.24% of changes in MPS is explained by BPS

ev

The Simple Regression equation of BPS and EPS taking MPS as dependent variable is given in

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Table No.4.14:

Table: 4.14

Variables

Regression Equation

MPS vs. BPS

MPS = 25.41 BPS 1685.71

MPS vs. EPS

MPS = 14.83 EPS + 206.16

Sh
an

S.N.

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Simple Regression Equation of LBL

(Researchers Analysis)

The first equation is the regression equation of MPS on BPS. The regression constant equals to 1685.71. This means that when DPS is zero, MPS will be decreased to Rs.-1685.71. Likewise, the
constant for DPS equals to 25.41, meaning that when DPS increases by Re.1, MPS decreases by
Rs.25.41 and vice versa.

The second equation refers t the regression equation of MPS on EPS. The regression constant equals
to 206.16. This means that when BPS becomes zero. MPS will be equal to Rs.206.16. Likewise, the

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constant for DPS equals to 14.83 means that when EPS increases/ decreases by Re.1, MPS increases/
decreases by Rs.14.83.

4.5.6 Lumbini Bank Limited


The summarized form of financial performance of Lumbini Bank Ltd. for the last six years has been

their significance.
Table: 4.15
Summary of the Financial Performance of LUBL
DPS

BPS

2003/04

84.71

2004/05

180

2005/06

172

2006/07

505

2007/08

631

2008/09

435

Total

1923

Mean

320.5

SD

175076

5.33

-39.35

-144.42

-161.21

32.91

86.95

30.31

34.13

-99.94

0.00

5.69

-16.66

0.00

85.44

83.96

1501.58

-503.97

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54.84

(Source: Annual Report of LUBL)

Sh
an

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29.5

ev

32.07

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49

-71.61

ke

CV

EPS

ry

MPS

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Year

Where,
SD

: Standard Deviation

CV :

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presented in the following table. It shows the relationship of EPS, DPS and BPS to MPS along with

Coefficient of Variation

The table (Table No. 4.15) has given above shows the financial performance of Lumbini Bank Ltd.

for the past six years. The market price per share of the bank is not available only for the year
2003/04. The company didnt distribute any dividend within the study period. The average BPS of
the company for the six years is Rs.5.69 with the Standard Deviation of 54.84%. The high
Coefficient of Variance (1501.58) indicates the high volatility of BPS. Standard Deviation of BPS
seems to be highest (85.44%) among the indicators. This bank has less volatility in MPS and EPS
whereas high in BPS than that of industry average.

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The following line chart (Figure No. 7) shows the linear relationship of Market Price per Share with
BPS, DPS and EPS.

RElationship of MPS, DPS, BPS and EPS

600
500
400
MPS

300

DPS

200

BPS

100
2003/04

2004/05

2005/06

2006/07

-200

2008/09

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-300

2007/08

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-100

EPS

ry

pu

Fiscal year

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Figure No.7: Relationship between MPS, DPS, BPS and EPS of LUBL

ev

4.5.7 Machhapuchhre Bank Limited

Shanker Dev Campus Library

700

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The table below shows the financial summary of Machhapuchhre Bank Ltd. over the last four years

ke

(after the company started share transactions) and the relationship of EPS, DPS and BPS to MPS

Sh
an

along with the significance of such relationship.

Table: 4.16

Summary of the Financial Performance of MBL

Year

MPS

DPS

BPS

EPS

2003/04

2004/05

165

115.96

15.43

2005/06

320

15.79

130.23

18.43

2006/07

620

121.74

9.02

2007/08

1285

021.05

141.59

10.35

2008/09

420

114.94

8.33

Total

2810

36.84

624.46

61.87

Mean

468.33

6.14

124.89

12.37

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SD

366.58

7.25

9.96

3.69

CV

78.27

118.09

0.6187

29.81

(Source : Annual Report of MBL)

SD

: Standard Deviation

CV :

Coefficient of Variation

Shanker Dev Campus Library

Where,

Table No. 4.16 presents the detail financial summary of Machhapuchhre Bank Limited (MBL) for

the past four years. As table shows, the bank has distributed its profit to the shareholders Rs.15.79

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per share on 2005/06 only. MPS, BPS and EPS of the company are increased each year showing the

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better financial strength in later years.

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The highest Coefficient of Variance (173.21%) is the variance of DPS. This indicates that DPS is

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most volatile than others. The second is EPS and is equal to 54.29%. The coefficient of Variation of

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MPS and BPS are 45.47% and 13.25% respectively. Standard Deviation of MPS seems to be the
least one (6.17%)

ev

The industry average of CV of MPS, BPS, DPS and EPS equals to 39.44%, 28.17%, 116.75% and

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28.31% respectively. This shows that MPS, DPS and EPS of this bank have higher degree of CV

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than that of industry. It means they are more volatile in than average banks. But BPS of this bank

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an

seems to be less volatile than that of industry average.

The relationship of MPS with BPS, DPS and EPS has been presented in the following table:
Table: 4.17

Relationship of BPS, EPS and DPS with MPS of MBL


Variables

r2

t-cal

a-value

b-value

t-table

Remarks

MPS vs. DPS

0.759

0.5766

2.334

160.3333

10.1119

2.776

Insignificant

MPS vs. BPS

0.987

0.9757

12.664

-478.633

6.1838

2.776

Insignificant

MPS vs. EPS

0.971

0.9438

8.198

37.32968

14.3321

2.776

Insignificant

(Researchers Analysis)
The relation of MPS with DPS, BPS and EPS is shown in Table No. 4.17. It illustrates that MPS is
positively correlated with DPS, BPS and EPS. It means rise in these indicator (DPS, BPS and EPS)
results the rise in MPS. Among these three indicators, Book Value per Share seems to be more

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positively correlated with the Market Price per Share. Likewise, Earning per Share is positively
correlated next to BPS, DPS is less correlated with MPS is comparison with others. Hence any rise in
Book value i.e. Market Capitalization or Earning per Share or Dividend per Share causes bigger
increase in MPS. T-calculation for the correlation of these indicators shows that r-value for BPS and

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EPS are significant whereas DPS is insignificant at 95% level of confidence.

The simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given
below:
Table: 4.18
Variables

Regression Equation

MPS vs. DPS

MPS = 10.11 DPS + 160.33

MPS vs. BPS

MPS = -478.63 BPS 488.63

MPS vs. EPS

MPS = 14.33 + 37.33

(Researchers Analysis)

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pu

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S.N.

ry

Simple Regression Equation of MBL

The first equation is the regression equation of MPS on DPS. The regression constant equals to

ev

160.33 and the constant for DPS equals to 10.11. This means that when DPS falls to zero, MPS

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Rs.10.11 and vice versa.

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equals to Rs.160.33 and when DPS increases/ decreases by Re.1, MPS increases/ decreases by

Sh
an

The second equation refers to the regression equation of MPS on BPS. The regression constant
equals to -478.633. This means that when BPS becomes zero, MPS will fall to Rs.478.633. Likewise,

6.184 is the constant for BPS meaning that when DPS increases/ decreases by Re.1 and MPS
increases / decreases by Rs.6.184 and vice versa.

Similarly, the last equation indicates the regression equation of MPS on EPS. 37.329 is the
regression constant equals of MPS on EPS. This means that when EPS falls to zero, MPS equals to

Rs.37.329. Likewise, the constant for EPS equals to 14.33 meaning that when DPS increases/
decreases by Re.1, MPS increases/ decreases by Rs.14.33 and vice versa.

The multiple Regression equation of MPS of Machhapuchhre Bank Limited on DPS and EPS is
represented by the following equation.

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MPS on DPS and EPS
MPS = 48.08 + 2.268 DPS + 12.298 EPS
The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept
i.e. multiple regressions constant as shown in the equation equals to 48.08. it implies that when DPS
and EPS becomes zero, MPS would be equal to Rs.48.08. The constant for DPS is 2.268 meaning

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that when DPS increases by Re.1, MPS will increases by Rs.2.268 keeping EPS constant. In the
same way, the constant for EPS equals to 12.298 means if DPS holds constant and EPS increases by
Rs.1, MPS will increases by Rs.12.298 and vice versa.

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4.5.8 NABIL Bank Limited

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The following table outlines the major financial performance of NABIL Bank Limited over the past

explained thereafter.

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Table: 4.19

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six years from 2003/04 to 2008/09. The relationship of MPS with DPS, BPS and EPS has been

BPS

EPS

2003/04

1000

65

301

92.61

2004/05

1505

70

337

105.49

2005/06

2240

85

381

129.21

5050

140

418

13.08

5275

100

354

108.31

2008/09

4899

85

324

106.76

Total

19969

545

2115

679.46

Mean

3328.167

90.833

352.5

113.24

SD

1786.561

24.375

38.318

15.14

CV

53.7

27.231

10.87

13.37

2006/07

Sh
an

2007/08

rD

MPS

ev

DPS

ke

Year

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Summary of the Financial Performance of NABIL

(Source : Annual Report of NABIL)


Where,
SD

: Standard Deviation

CV :

Coefficient of Variation

The above table presents the summary of financial performance of NABIL Bank Limited for the last
six years. From the table, it can be revealed that Market Price per Share was lowered to 5275 on

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2007/08 from 4899 on 2008/09. But before this it has been continuously increasing each year till
2007/08. The organization is distributing its DPS each year in increasing trend. It shows the
betterment in its performance each year. Standard Deviation of MPS, DPS, BPS and EPS are
1786.561%, 24.375%, 38.318% and 15.14% respectively. In the same way, Coefficient of
Covariance of MPS, DPS, BPS and EPS are 41.89, 51.67, 19.9 and 29.18 respectively. It indicates

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that BPS is less volatile among these indicators whereas DPS is most volatile.

The industry average of CV of MPS, BPS, D PS and EPS as calculated by computer equals to
39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that MPS and EPS of this bank

ry

have higher degree of CV than that of industry. It means they are more volatile in than average

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banks. But BPS and DPS of this bank seems to be less volatile than that of industry average.

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The following line chart (Figure No.8) shows the linear relationship of Market Price per Share with

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BPS, DPS and EPS.

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Relationship of MPS, DPS, BPS and EPS


6000

ev

5000

MPS
DPS

rD

4000
3000

BPS
EPS

ke

2000

Sh
an

1000
0

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

Figure No.8: Relationship between MPS, DPS, BPS and EPS of NABIL
The relation of MPS with BPS, DPS and EPS has been presented in the following table:
Table: 4.20
Relationship of BPS, EPS and DPS with MPS of NABIL
Variables

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

0.4763

0.2269

749.48

9.6852

0.7618

2.776

Insignificant

MPS vs. BPS

0.6429

0.4133

-631.313

6.6424

2.0341

2.776

Insignificant

MPS vs. EPS

0.6882

0.4736

26.89

15.5080

2.7489

2.776

Insignificant

(Researchers Analysis)

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The table given above (Table No.4.20) shows the relation of MPS with DPS, BPS and EPS. It
reflects that MPS of NABIL Bank is positively correlated with DPS, BPS and EPS. It indicates that
raise in these indicators results the rise in MPS and vice versa. The simple correlation coefficient of
DPS, BPS and EPS are 0.4763, 0.6429 and 0.6882. it means if DPS rise by Rs.100, the MPS will be
raised by Rs.47.63. in the same way, Rs.100 increase in BPS and EPS results the increment of

significant at 95% level of confidence for all these independent variables.

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Rs.64.29 and Rs.68.82 in MPS respectively. Despite this, the degrees of correlation are not

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given

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below:

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Table: 4.21

Simple Regression Equation of NABIL


Regression Equation

MPS vs. DPS

MPS = 8.69 DPS + 749.47

MPS vs. BPS

MPS = 6.25 BPS 631.424

MPS vs. EPS

MPS = 15.41 EPS + 26.77

(Researchers Analysis)

ev

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m

pu

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Variables

rD

The first equation is the regression equation of MPS on DPS. The regression constant equals to
749.47. This means that when DPS falls to zero, MPS equals to Rs.749.47. Likewise, the constant for

Sh
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versa.

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DPS equals to 8.569 implies that when DPS increases by Re.1, MPS increases Rs.8.69 and vice

The second equation refers to the regression equation of MPS on BPS. The regression constant

equals to -631.424. This means that when BPS becomes zero, MPS fall to -631.424. Likewise, the
constant for BPS equals to 6.25 meaning that when DPS increases/decreases by Re.1, MPS
increases/ decreases by Rs.6.25.

In the same way the last equation indicates the regression equation of MPS on EPS. The regression
constant equals to 26.77. This means that when E PS falls to zero, MPS equals to Rs.26.77.
Likewise, the constant for EPS equal to 15.41 meaning that when DPS increases/decreases by
Rs.15.41 and vice versa.

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The Multiple Regression equation of MPS of NABIL Bank Limited on DPS and EPS is represented
by the following equation.
MPS on DPS and EPS
MPS = -1425.36 44.89 DPS + 67.38 EPS

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The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept
i.e. multiple regressions constant as shown in the equation equals to -1425.36. It implies that when

DPS and EPS becomes zero, MPS would be equal to Rs.-1425.36. The constant for DPS is -44.49
meaning that when DPS increases by Re.1, MPS will be decreases by Rs.34.89 keeping EPS

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4.5.9 Nepal Credit and Commerce Bank Limited

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EPS increase by Re.1, MPS will increases by Rs.67.38 and vice versa.

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constant. In the same way, the constant for EPS equals to 67.38 means if DPS holds constant and

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The following table outlines the major financial performance of NCC Ban k Limited over the past six

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years from 2003/04 to 2008/09.

Table: 4.22

MPS

BPS

EPS

2003/04

NA

0.027

0.06

120

0.365

-0.74

94

-0.044

-84.77

2006/07

316

-0.073

-16.57

2007/08

457

0.049

35.63

2008/09

335

0.078

29.35

Total

1322

0.402

-36.364

Mean

220.33

0.067

-6.061

SD

131.871

0.45

36.02

CV

59.852

671.64

-594.355

2004/05

Sh
an

2005/06

ke

Fiscal Year

ev

DPS

rD

Summary of the Financial Performance of NCCBL

(Source: Annual Report of NCCBL)

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Where,
SD

: Standard Deviation

CV

: Coefficient of Variation

NA

: Not available

Nepal Credit and Commerce Bank Limited opened its share to the general public on 2060/61 for the first

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time. And no dividend has been distributed t its shareholders with in the period of this study period. Till

the date of preparation of this thesis, the General Meeting of the bank has been approved its financial
report of fiscal year 2065/66. So data has been published out for this year, Hence, Due to the availability
of required data, complete analysis has been made in this thesis. The available data regarding BPS and

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EPS shows that the organization is in little progress in later years, it has made the profit from its

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operation, the variability of BPS is 671.64% whereas that of EPS is -594.355 Such high variability shows

the inconsistency in these indicators. This bank has very high volatility of BPS and E PS in comparison

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with the average. This indicates the inconsistency in these indicators.

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The following line chart (Figure No.9) shows the linear relationship of Market Price per Share with
BPS, DPS and EPS.

ev

Relationship of MPS weth DPS, BPS and EPS

rD

500

Sh
an

300

ke

400

MPS

200

DPS

100

BPS
EPS

0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

-100
-200
Fiscal Year

Figure No.9: Relationship between MPS, DPS, BPS and EPS of NCCBL

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4.3.10 Nepal Bangladesh Bank Limited
The following table outlines the major financial performance of Nepal Bangladesh Bank Limited
over the past six years from 2003/04 to 2008/09. The relationship of MPS with DPS, BPS and EPS
has been explained thereafter.
Table: 4.23
MPS

DPS

BPS

EPS

2003/04

354

182

0.73

2004/05

265

188

1.58

2005/06

199

-117

2006/07

550

-364

2007/08

1001

2008/09

280

Total

2642

Mean

441.5

SD

669.71

CV

151.69

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80.16

60

116.01
198.48

-57.60

33.08

681.43

105.11

-1181.6

318.95

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-295

-346

Ca
m
ev

(Source: Annual Report of NBBL)

rD

Where,

ry

Fiscal Year

: Standard Deviation

CV :

Coefficient of Variation

Sh
an

ke

SD

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Summary of the Financial Performance of NBBL

The above table presents the summary of financial performance of Nepal Bangladesh Bank Limited
for the last six years. From the table, it can be revealed that Market Price per Share is in downward

trend since 2000/01 after three years. Likewise, the Bank has not distributed its Dividend. The EPS

of the organization is also continuously decreasing from the year 2004/05 to 2006/07. The downward
trend of these indicators shows that the bank is experiencing some financial crisis in these years. The

high variability of DPS and EPS shows that the Dividend payments as well as the earning per share
of the company is not consistent through out the study period. In comparison, MPS and BPS has low
degree of variability.

The industry average of CV of MPS, BPS, DPS and EPS calculated by computer equals to 39.44%,
28.17%, 116.75% and 28.31% respectively. This shows that MPS, DPS and EPS of this bank have

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higher degree of CV than that of industry. It means they are more volatile in than average banks. But
BPS of this bank seems to be less volatile than that of industry average.

The following ling chart shows the linear relationship of Market Price per share with BPS, DPS and

The relation of MPS with BPS, DPS and EPS has been presented in the following table:
Table: 4.24
Relationship of BPS, EPS and DPS with MPS of NBBL
r2

t-cal

a-value

b-value

t-table

MPS vs. DPS

0.9540

0.9100

6.3604

333.6

13.9345

2.776

MPS vs. BPS

0.9079

0.8243

4.3325

-1577.34

10.3802

MPS vs. EPS

0.9786

0.9577

9.5149

220.448

9.7886

Remarks

ry

Significant

ib
ra

Variables

Significant

2.776

Significant

sL

2.776

pu

(Researchers Analysis)

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EPS.

Ca
m

The table given above (Table No 4.24) shows the relation of MPS with DPS, BPS and EPS. It

reflects that MPS of Nepal Bangladesh Bank is positively correlated with DPS, BPS and EPS. It

ev

indicates that raise in these indicators results the rise in MPS and vice versa. The simple correlation

rD

coefficient of DPS, BPS and EPS are 0.9540, 0.9079 and 0.9786. it means if DPS rise by Rs.100, the

MPS will be raised by RS. 95.40. In the same way, Rs.100 increase in BPS and EPS results the

ke

increment of Rs.90.79 in MPS respectively. The degrees of correlation of all the indicators with MPS

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an

are significant in 95% level of confidence.

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given
in Table No.4.25:
Table: 4.25
Simple Regression Equation of NBBL
S.N

Variables

Regression Equation

MPS vs. DPS

MPS= 13.93.6 DPS+333.6

MPS vs. BPS

MPS= 10.38 BPS-1577.34

MPS vs. EPS

MPS= 9.7886 EPS+220.45

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(Researchers Analysis)
The first equation is the regression equation of MPS on DPS. The regression constant equals to
333.60. This means that when DPS falls to zero, MPS equals to 333.60. Likewise, the constant for
DPS equals to 13.93 implies that when DPS increases by Rs.1, MPS increases Rs.13.93 and vice
versa.

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The second equation refers to the regression equation of MPS on BPS. The regression constant
equals to -15577.34. This means that when BPS becomes zero, MPS falls to -1577.34. Likewise, the
constant for BPS equals to 10.38 meaning that when DPS increases/decreases by Rs.1, MPS

ry

increases/decreases by Rs.10.38.

ib
ra

In this way the last equation indicates the regression equation of MPS on EPS. The regression
constant equals to 220.448. This means that when EPS falls to zero, MPS equals to Rs.220.448.

pu

MPS increases/decreases by Rs.9.789 and vice versa.

sL

Likewise, the constant for EPS equals to 9.789 meaning that when DPS increases/decreases by Rs.1,

represented by the following equation.

rD

ev

MPS on DPS and EPS

Ca
m

The multiple Regression equation of MPS of Nepal Bangladesh Bank Limited on DPS and EPS is

MPS = 306.8 + 5.42 DPS + 5.978 EPS

ke

The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept

Sh
an

i.e. multiple regressions constant as shown in the equation equals to 306.8. It implies that when DPS
and EPS becomes zero, MPS would be equal to Rs.306.8. The constant for DPS is 5.42 meaning that

when DPS increases by Rs.1, MPS will increases by Rs.5.42 keeping EPS constant. In the same way,
the constant for EPS equals to 5.978 means if DPS holds constant and EPS increases by Rs.1, MPS
will decreases by Rs.5.978 and vice versa.

4.3.11 Nepal Industrial and Commercial Bank Limited


The following table shows the major financial performance of Nepal Industrial and Commercial
Bank Limited over the past six years from 2003/04 to 2008/09. The relationship of MPS with DPS,
BPS and EPS has been explained thereafter.

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Table: 4.26
MPS

DPS

BPS

EPS

2003/04

218

124.09

13.65

2004/05

366

30

136.84

22.75

2005/06

496

10.53

127.74

16.1

2006/07

950

1.05

139.166

24.01

2007/08

1284

1.05

138.9

25.75

2008/09

1126

0.79

145.58

27.83

Total

4440

43.42

811.51

130.09

Mean

740

7.24

135.2515

SD

400.19

10.389

CV

54.08

143.44

ib
ra

ry

Year

21.68

5.1085

5.35

23.56

sL

7.23

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Summary of the Financial Performance of NICBL

Where,

Ca
m

pu

(Source: Annual Report of NICBL)

: Standard Deviation

CV :

Coefficient of Variation

ev

SD

rD

The above table presents the summary of financial performance of Nepal Industrial and Commercial

ke

Bank Limited for last six years. From the table, it can be revealed that the Market price per share was

Sh
an

in increasing order from 2000/01 to 2007/08. Then in the following years, it has been decreased to
some extent. The company did not distribute the dividend on 2003/04 and then distributed on
2004/05 and 2005/06 at the rate of Rs.30 and Rs.10.53 respectively and it decrease following year.

The trend of BPS seems to be increasing from 2003 to 2009. The table shows that Coefficient of
Variance of MPS, DPS, BPS and EPS are 54.08%, 143.44%, 5.35% and 23.56% respectively. This

indicates that the BPS has low degree of volatility (10.41%) among these four indicators. In constant,
DPS has highest Coefficient of Variance (143.44%) followed by EPS (23.56%) and MPS (54.08%).

The industry average of CV of MPS, BPS, DPS and EPS calculated by 39.44%, 28.17%, 116.75%
and 28.31% respectively. This shows that DPS and EPS of this bank have higher degree of CV than
that of industry. It means they are more volatile in than average banks. But MPS, BPS of this bank
seems to be less volatile than that of industry average.

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The following line chart shows the linear relationship of Market Price per Share with BPS, DPS and
EPS
Relationship of MPS with DPS, BPS and EPS
1400
1200
MPS
800

DPS

600

BPS
EPS

400

0
2004/05

2005/06

2006/07

2007/08

2008/09

sL

Fiscal Year

ib
ra

2003/04

ry

200

pu

Figure No.10: Relationship between MPS, DPS, BPS and EPS of NICBL

Ca
m

The relations or MPS with BPS, DPS and EPS has been presented in the following table:

Table: 4.27

r2

MPS vs. DPS

0.5713

MPS vs. BPS

0.3325

MPS vs. EPS

0.5337

t-cal

a-value

b-value

t-table

Remarks

0.3264

1.3923

277.044

5.5756

2.776

Insignificant

0.1106

0.7051

-9.03528

2.8215

2.776

Insignificant

0.2848

1.2622

233.6041

7.8937

2.776

Insignificant

Sh
an

ke

rD

Variables

ev

Relationship of BPS, EPS and DPS with MPS of NICBL

(Researchers Analysis)

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1000

The relations of MPS with DPS, BPS and EPS are shown in Table No.4.27. It shows that MPS of

Himalayan Bank is positively correlated with all three indicators DPS, BPS and EPS. It indicated
that if DPS BPS or EPS increases, MPS also increases. Among these, BPS has the low degree of
correlation (33.25%) whereas the degree of correlation is bit higher than that of BPS in the case of

DPS (57.13%) and EPS (53.37%). It means that if DPS rise by Rs.100, the MPS will be raised by
Rs.57.13. in the same way, Rs.100 increase in BPS and EPS results the increment of Rs.33.25 and
Rs.53.37 in MPS. The coefficient of determination shows that the 28.48% of change in the MPS is
explained by EPS, 11.06% of changes in MPS are explained by BPS and the ratio to DPS is 32.64%.
Despite this, the degree of correlation is not significant at 95% level of confidence for all these
independent variables.

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Table: 4.28
Simple Regression Equation of NICBL
S.N

Variables

Regression Equation

MPS vs. DPS

MPS= 5.58 DPS+277.04

MPS vs. BPS

MPS= 2.82 BPS-9.04

MPS vs. EPS

MPS= 7.89 EPS+233.60

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(Researchers Analysis)

The first equation is the regression equation of MPS on DPS. The regression constant equals to
277.04. This means that when DPS falls to zero, MPS equals to Rs.277.04. Likewise, the constant for

ib
ra

ry

DPS equals to 5.58 implies that when DPS increases by Re.1, MPS increases Rs.5.58 and vice versa.

The second equation refers to the regression equation of MPS on BPS. The regression constant

sL

equals to -9.04. This indicates that when BPS becomes zero, MPS will fall to Rs.-9.04. Likewise, the

pu

constant for BPS equals to 2.82 meaning that when DPS increases by Re.1, MPS decreases by

Ca
m

Rs.2.82 and vice versa.

ev

In the same way the last equation indicates the regression equation of MPS on EPS. The regression

constant equals to 233.60. This means that when EPS falls to zero, MPS equals to Rs.233.60.

rD

Likewise, the constant for EPS equals to 7.89 meaning that when DPS increases/decreases by Re.1,

Sh
an

ke

MPS increases/decreases by Rs.7.89 and vice versa.

The Multiple Regression equation of MPS of NIC Bank Limited on DPS and E PS is represented by
the following equation.
MPS on DPS and EPS
MPS = 256.58 + 3.976 DPS + 2.96 EPS

The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept

i.e. multiple regressions constant as shown in the equation equals to 256.58. It implies that when
DPS and EPS becomes zero, MPS would be equal to Rs.256.58. the constant for DPS is 3.976
meaning that when DPS increases by Re1, MPS will increases by Rs.3.976 keeping EPS constant. In
the same way, the constant for EPS equals to 2.96 means if DPS holds constant and EPS increases by
Re.1, MPS will increases by Rs.2.96 and vice versa

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4.3.12 Nepal Investment Bank Limited
The following table outlines the major financial performance of Nepal Investment Bank Limited
over the past six years from 2003/04 to 2008/09. The relationship of MPS with DPS, BPS and EPS
has been shown in the table.
Table: 4.29
MPS

DPS

BPS

EPS

2003/04

940

15

246.89

51.7

2004/05

800

12.5

200.8

39.5

2005/06

1260

55.46

239.67

59.35

2006/07

1729

30

234

2007/08

2450

40.83

2008/09

1388

20

Total

8567

173.79

Mean

1427.83

28.97

SD

547.332

CV

38.33

ib
ra

62.57
57.87

162

37.42

sL

223

308.41

217.73

51.40

15.22

28.92

9.72

52.50

13.28

18.90

ev

Ca
m

pu

1306.36

(Source : Annual Report of NIBL)

rD

Where,

ry

Fiscal Year

: Standard Deviation

CV :

Coefficient of Variation

Sh
an

ke

SD

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Summary of the Financial Performance of NIBL

The above table presents the summary of financial performance of Nepal Investment Bank Limited

for the last six years 2003/04 to 2008/09. The table shows that Market Price per Share was dropped

to Rs.800 (2004/05) from 960 (2003/04) firstly. After this also the MPS of this bank seems to be
fluctuating randomly ups and downs in the following years. The bank has distributed different
amount DPS over the period. The data shows that the rate of dividend distributed and BPS of the

bank is not consistent. EPS of the company is in increasing trend except the year 2004/05 and current
year. The Coefficient of Covariance of MPS is 38.33% whereas that of DPS is 52.50%. In the same
way it is 13.28% for BPS and 18.90% for EPS. It indicates that the degree of variability is higher in
DPS and hence is more volatile than others. BPS bears the low degree of volatility in comparison to
others. MPS and EPS have almost equal degree of variance.

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The industry average of CV of MPS, BPS, DPS and EPS calculated by the help of computer equals
to 39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that all the financial indicators
MPS, BPS, DPS and EPS have low degree of CV than that of industry average. It means they are less
volatile than average banks which in fact show the more consistencies in the banks financial

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performance.

The following line chart shows the linear relationship of Market Price per Share with BPS, DPS and
EPS.
Relationship of MPS with DPS, BPS and EPS

ib
ra

ry

3000
2500

sL

2000

1000

Ca
m

500
0
2003/04

2004/05

2005/06

2006/07

2007/08

DPS
BPS
EPS

pu

1500

MPS

2008/09

rD

ev

Fiscal Year

ke

Figure No.11: Relationship between MPS, DPS, BPS and EPS of NIBL

Sh
an

The relation of MPS with BPS, DPS and EPS has been presented in the following table:

Table: 4.30

Relationship of BPS, EPS and DPS with MPS of NIBL


Variables

r2

t-cal

a-value

b-value

t-table

Remarks

MPS vs. DPS

0.4213

0.117

0.891

917.289

4.1632

2.776

Insignificant

MPS vs. BPS

0.0928

0.010

0.2816

894.583

0.4897

2.776

Insignificant

MPS vs. EPS

0.4737

0.191

0.2621

474.821

9.6267

2.776

Insignificant

(Researchers Analysis)
The table given above (Table No.4.30) shows the relation of MPS with DPS, BPS and EPS. It
reflects that MPS of NIBL Bank is positively correlated with DPS, BPS and EPS. It indicates that
raise in these indicators results the rise in MPS and vice versa. The simple correlation coefficient of

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DPS, BPS and EPS are 0.4213, 0.0928 and 0.4737.it means if DPS rise by Rs.100, the MPS will be
raised by Rs.42.13. In the same way, Rs.100 increase in BPS and EPS results the increment of
correlation are not significant at 95% level of confidence for all these independent variables.

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given

Table: 4.31

Variables

Regression Equation

MPS vs. DPS

MPS= 4.16 DPS + 917.289

MPS vs. BPS

MPS= 0.489 BPS + 894.58

MPS vs. EPS

MPS= 9.627 EPS+ 474.821

(Researchers Analysis)

sL

ib
ra

S.N

ry

Simple Regression Equation of NIBL

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bellow:

pu

The first equation is the regression equation of MPS on DPS. The regression constant equals to

Ca
m

917.289. This means that when DPS falls to zero, MPS equals to Rs.917.289. Likewise, the constant

for DPS equals to 4.16 implies that when DPS increases by Re.1, MPS increases Rs.4.16 and vice

rD

ev

versa.

The second equation refers to the regression equation of MPS on BPS. The regression constant

ke

equals to 894.58. This means that when BPS becomes zero, MPS will be Rs.894.58. Likewise, the

Sh
an

constant for BPS equals to 0.4897 meaning that when DPS increases by Re.1, MPS increases by
Rs.0.4897 and vice versa.

In the same way the last equation indicates the regression equation of MPS on EPS. The regression

constant equals to 9.627. Likewise, the constant for EPS equals to 474.821 meaning that when DPS
increases/decreases by Re.1, MPS increases/decreases by Rs.474.821 and vice versa.

The Multiple Regression equation of MPS of Nepal Investment Bank Limited on DPS and EPS is
represented by the following equation.
MPS on DPS and EPS

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MPS = 464.75 1.05 DPS + 11.89 EPS

The above equation gives the results on MPS due to the joint effect on DPS and EPS.MPS intercepts
i.e. multiple regressions constant as shown in the equation equals to 464.75. It implies that when
DPS and EPS becomes zero, MPS would be equal to Rs.464.75. The constant for DPS is

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1.05meaning that when DPS increases by Re.1, MPS will decreases by Rs.1.05 keeping EPS
constant. In the same way, the constant for EPS equals to 11.89 means if DPS holds constant and
EPS increases by Re.1, MPS will increases by Rs.11.89 and vice versa.

ry

4.5.13 Nepal SBI Bank Limited

ib
ra

The following table provides the information about the major financial performance of SBI Bank

and EPS has been shown in the table.

pu

Table: 4.32

sL

Limited over the past six years from 2003/04 to 2008/09. The relationship of MPS with DPS, BPS

DPS

BPS

EPS

2003/04

307

146.8

14.26

2004/05

335

159.54

13.29

151.78

18.27

1176

47.59

178.04

39.35

2007/08

1511

160.57

28.33

2008/09

1900

42.11

194.68

36.18

Total

58.41

94.7

991.41

149.68

Mean

973.5

15.783

165.235

24.947

SD

601.512

17.931

16.361

10.326

CV

61.8

113.6

9.902

41.4

Sh
an

2006/07

612

ke

2005/06

ev

MPS

rD

Fiscal Year

Ca
m

Summary of the Financial Performance of NSBI

(Source: Annual Report of NSBI Bank)

Where,
SD

: Standard Deviation

CV :

Coefficient of Variation

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The above table (Table No. 4.32) presents the summary of financial performance of Nepal SBI Bank
Limited for last six years (2003/04 to 2008/09). The table shows that Market Price per Share was
increased gradually. The bank distributed dividend to its shareholders thrice year over the study
period i.e. on 2005/06, 2006/07 and 2008/09 at the rate of Rs.5 and Rs47.59 and 42.11 to each share
respectively. The EPS of the company has been increasing since the beginning continuously. The

and EPS are 61.8%, 9.902% and 41.40% respectively.

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volatility of DPS (113.60%) seems highest among other indicators. Likewise volatility of MPS, BPS

The industry average of CV of MPS, BPS, DPS and EPS calculated by computer software equals to

ry

39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that MPS and DPS of this bank

ib
ra

have higher degree of CV than that of industry. It means they are more volatile in than average

sL

banks. But BPS and EPS of this bank seems to be less volatile than that of industry average.

pu

The following line chart (Figure No.12) shows the linear relationship of Market Price per Share with

Ca
m

BPS, DPS and EPS.

ev

Relationship of MPS with DPS, BPS and EPS

rD

2000
1800
1400

MPS
DPS

Sh
an

1200

ke

1600

1000

BPS

800

EPS

600
400
200

0
2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

Figure No.12: Relationship between MPS, DPS, BPS and EPS of NSBI

The relation of MPS with BPS, DPS and EPS has been presented in the following table.

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Table: 4.33
Variables

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

0.894

0.8004

357.56

41.3621

3.3628

2.776

Significant

MPS vs. BPS

0.672

0.4526

-2147.53

21.5893

1.7628

2.776

Insignificant

MPS vs. EPS

0.443

0.1960

1253.96

-42.7283

0.9478

2.776

Insignificant

(Researchers Analysis)

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Relationship of BPS, EPS and DPS with MPS of NSBI

The table given above (Table No.4.33) shows the relation of MPS with DPS, BPS and EPS. It

reflects that MPS of Nepal SBI Bank is positively correlated with DPS, BPS and negatively

ry

correlated with EPS. It indicates that raises in DPS and BPS results the rise in MPS and vice versa.

ib
ra

But the raise in EPS results the decrease in MPS. The simple correlation coefficient of DPS, BPS and

sL

EPS are 0.8947, 0.6728 and 0.4432. It means if DPS or BPS rise by Rs.100, the MPS will be raised

by Rs.89.47 and Rs.67.28 respectively. In the same way, Rs100 increase in EPS results the decrease

pu

of Rs 44.32 in MPS. T-value of correlation with these indicators indicates that degree of correlation

Ca
m

is significant at 95% level of confidence of DPS whereas insignificant for BPS and EPS.

ev

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given

ke

rD

below:

Table: 4.34

Simple Regression Equation of NSBI

Variables

Regression Equation

MPS vs. DPS

MPS= 41.36 DPS+357.56

MPS vs. BPS

MPS= 21.59 BPS 2147.53

MPS vs. EPS

MPS= - 42.72 EPS + 1253.96

Sh
an

S.N

(Researchers Analysis)
The first equation gives in Table no.4.34 is the regression equation of MPS on DPS. The regression

constant equals to 357.56. This means that when DPS falls to zero, MPS equals to Rs.357.56.
likewise, the constant for DPS equals to 41.36 implies that when DPS increases by Re.1, MPS
increases Rs.41.36 and vice versa.

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The second equation of Table No.4.34 refers to the regression equation of MPS of BPS. The
regression constant equals to -2147.53. This means that when BPS becomes zero, MPS will be
decreased to -2147.53. Likewise, the constant for BPS equals to 21.59 meaning that when DPS
increases by Re.1, MPS increases by Rs.21.59 and vice versa.

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In the same way the last equation indicates the regression equation of MPS on EPS. The regression
constant equals to 1253.96. This means that when EPS falls to zero, MPS equals to Rs.1253.96.

Likewise, the constant for EPS equals to -42.72 meaning that when DPS increases by Re.1, MPS

ry

decreases by Rs.42.72 and vice versa.

ib
ra

The Multiple Regression equation of MPS of Nepal SBI Bank Limited on DPS and EPS is
represented by the following equation.

sL

MPS on DPS and EPS

Ca
m

pu

MPS = -7.178 + 54.64 DPS + 25.94 EPS

The above equation gives the result on MPS due to the joint effect on DPS and EPS. MPS intercept

i.e. multiple regressions constant as shown in the equation equals to -7.178. It implies that when DPS

ev

and EPS becomes zero, MPS would be equal to Rs.-7.178. The constant for DPS is 54.64 meaning

rD

that when DPS increases by Re.1, MPS will increases by Rs.54.64 keeping EPS constant. In the

ke

same way, the constant for EPS equals to 25.94 means if DPS holds constant and EPS increases by

Sh
an

Re.1, MPS will increases by Rs.25.94 and vice versa.

4.5.14 Siddhartha Bank Limited

The Table No.4.35 provides the information about the major financial performance of Siddhartha
Bank Limited from 2003/04 to 2008/09.
Table No. 4.35
Summary of the Financial Performance of SBL
Year

MPS

DPS

BPS

EPS

2003/04

90.75

2004/05

110.83

20.08

2005/06

360

120.63

13.05

2006/07

778

15.79

132.29

15.88

2007/08

1090

15.79

130.39

17.29

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Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
2008/09

1000

10.53

134.29

22.89

Total

3228

42.11

719.18

80.30

Mean

538

7.02

119.87

13.39

SD

318.8

5.262

15.29

10.39

CV

59.14

74.96

12.76

77.64

Where,
SD

: Standard Deviation

CV :

Coefficient of Variation

Shanker Dev Campus Library

(Source : Annual Report of SBL)

ib
ra

ry

Siddhartha Bank opened its share to the general public on 2060/61 for the first time. And dividend

has been distributed three times to its shareholders with in the study. Due to the unavailability of

sL

required data like DPS, MPS no complete analysis has been made in this thesis. The available data

pu

regarding BPS and EPS shows that the organization was in loss in former years whereas it has

progressed and succeeds to increase its EPS. The BPS of bank remains fluctuating over the period.

Ca
m

The coefficient of covariance of EPS equals to 77.64% and that of BPS equals to 12.76%. The high

degree of CV of EPS shows the high volatility. The BPS of this bank has less degree of CV than that

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ev

of industry average. But in contrast, EPS has higher degree of CV than that of industry average.

ke

The following line chart (Figure No.13) shows the linear relationship of Market Price per Share with

Sh
an

BPS, DPS and EPS.

Relationship of MPS, with DPS, BPS and EPS

1200
1000
800

MPS DPS -

600

BPS 90.75
EPS -

400
200
0
2004/05

2005/06

2006/07

2007/08

2008/09

Fiscal Year

Figure No.13: Relationship between MPS, DPS, BPS and EPS of SBL

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4.5.15 Standard Chartered Bank Limited
The following table (Table No.4.36) outlines the major financial performance of Standard Chartered
Bank Limited over the past six years from 2003/04 to 2008/09. The relationship of MPS with DPS,

Table No. 4.36


Summary of the Financial Performance of SCBL
MPS

DPS

BPS

EPS

2003/04

1745

110

327.5

143.55

2004/05

2345

120

363.86

2005/06

3775

140

2006/07

5900

130

2007/08

6830

130

2008/09

6010

100

Total

26605

Mean

4434

SD

1932.3

CV

43.58

399.25

167.37

sL

ib
ra

175.84

422.38

131.92

468.22

109.99

730

2531

871.8

122

421.84

145.3

13.44

59.61

21.81

11.02

14.13

15

pu

403.15

Ca
m

ev

143.14

(Source: Annual Report of SCBL)

Where,
SD

Sh
an

ke

rD

ry

Fiscal Year

: Standard Deviation

CV :

Shanker Dev Campus Library

BPS and EPS has been explained thereafter.

Coefficient of Variation

The above table presents the summary of financial performance of Standard chartered Bank Limited

from 2003/04 to 2008/09. From the table, it can be revealed that Market Price Per share was dropped

to Rs.6010 on 2008/09 from Rs.6830 of 2007/08. but after this it has been continuously increasing
each other year. The organization is distributing its DPS each year over the period. Likewise, the
BPS and EPS are also is increasing trend except for the year 2008/09. Standard deviation of MPS,
DPS, BPS and EPS are 1932.3%, 13.44%, 59.61% and 21.81% respectively. In the same way,
Coefficient of Covariance of MPS, DPS, BPS and EPS are 43.58%, 11.02%, 14.13% and 15%
respectively. It indicates that EPS is less volatile among all whereas DPS is most volatile one.

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The industry average of CV of MPS, BPS, DPS and EPS as calculated by computer software equals
to 39.44%, 28.17%, 116.75% and 28.31% respectively. This shows that all the financial indicators
MPS, BPS, DPS and EPS have low degree of CV than that of industry average. It means they are less
volatile than average banks which in fact show the more consistent in the banks financial

Figure No. 14 shows the linear relationship of Market Price per Share with BPS, DPS and EPS.
Relationship of MPS with DPS, BPS and EPS
8000

ry

7000
6000

ib
ra

MPS

5000

DPS

4000

BPS

sL

3000

1000
0
2004/05

2005/06

2006/07

Fiscal Year

2007/08

Ca
m

2003/04

EPS

pu

2000

2008/09

ev

Figure No.14: Relationship between MPS, DPS, BPS and EPS of SCBL

Table: 4.37

ke

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The relationship of MPS with BPS, DPS and EPS has been presented in the following table:

Sh
an

Relationship of BPS, EPS and DPS with MPS of SCBL


r

r2

a-value

b-value

t-cal

t-table

Remarks

MPS vs. DPS

0.7944

0.6311

-2775

43.2957

2.6157

2.776

Insignificant

MPS vs. BPS

0.6806

0.4632

-2419.73

11.6352

1.8577

2.776

Insignificant

0.7489

0.5608

-2.776

38.3536

2.2601

2.776

Insignificant

Variables

MPS vs. EPS

(Researchers Analysis)

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performance.

The table given above table shows the relation of MPS with DPS, BPS and EPS. It reflects that MPS
of Standard Chartered Bank is positively correlated with DPS, BPS and EPS. It means raise in these
indicators results the rise in MPS and vice versa. The simple correlation of DPS, BPS and EPS are
0.7944, 0.6806 and 0.7489. Hence, if DPS rise by Rs.100, the MPS will be raise by Rs.79.44. in the
same way, Rs.100 increase in BPS and EPS results the increment of Rs.68.06 and Rs.74.89 in MPS

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respectively. Despite this, the degree of correlation is not significant at 95% level of confidence for
all these independent variables.

The Simple Regression equation of DPS, BPS and EPS taking MPS as dependent variable is given
below:

Variable

Regression Equation

MPS vs. DPS

MPS = 43.29 DPS - 2775

MPS vs. BPS

MPS = 11.64 BPS 2419.73

MPS vs. EPS

MPS = 38.35 EPS 3420.18

ib
ra

S.N.

ry

Regression Equation of SCBL

(Researchers Analysis)

Shanker Dev Campus Library

Table: 4.38

sL

In Table No.4.38, the first refers to the regression equation of MPS on DPS. The regression constant

pu

equals to -2772. This means that when DPS falls to zero, MPS will drop by Rs.-2775. Likewise, the

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m

constant for DPS equals to 43.29 implies that when DPS increases by Re.1, MPS increases Rs.43.29

ev

and vice versa.

rD

The second equation is the regression equation of MPS on BPS. The regression constant equals to 2419.73. This means that when BPS becomes zero, MPS fall to -2419.73. Likewise, the constant for

Sh
an

by Rs.11.64.

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BPS equals to 11.64 meaning that when DPS increases/ decreases by Re.1, MPS increases/decreases

Likewise, the last equation indicates the regression equation of MPS on EPS. The regression constant

equals to -3420.18. This means that when EPS falls to zero, MPS will drops to Rs.-3420.18.
Likewise, the constant for EPS equals to 38.35 meaning that when DPS increases by Re.1, MPS
increases by Rs.38.35 and vice versa.

The multiple Regression equation of MPS of Standard Chartered Bank Limited on DPS and EPS is
represented by the following equation.
MPS on DPS and EPS
MPS = -6828.57 70.41 DPS + 116.82 EPS

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The above equation gives the result of MPS due to the joint effect on DPS and EPS. MPS intercept
i.e. multiple regressions constant as shown in the equation equals to -6828.57. It implies that when
DPS and EPS becomes Zero, MPS would be equal to Rs.-6828.57. The constant for DPS is -70.41
meaning that when DPS increases by Re.1, MPS will decreases by Rs.7.41 keeping EPS constant. In
the same way, the constant for EPS equals to 116.82 means if DPS holds constant and EPS increases

4.6 Primary Data Analysis

Shanker Dev Campus Library

by Re.1, MPS will increases by Rs.116.82 and vice versa.

For the purpose of collecting primary data, a questionnaire having a set of 12 questions were

ry

prepared and presented to 25 respondents. The respondents were selected randomly from the group

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of Share- Known personalities especially from the share buyer/ sellers in NEPSE floor and College

sL

Students. The questions contained variety in types. From Question No.1 to 4, the questions were of
Multiple Choice Type in which the respondents were asked to choose the best alternative from the

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list. From the question No.5 to 11, the degree of agreement over the statement was asked to mention.

APPENDIX - I

ev

4.6.1 Classification of Respondents

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In question No.12 it is asked to respondent to Rank 1 to 6. The model of questionnaire is presented in

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A total of 25 respondents were surveyed randomly from the floor of NEPSE to conclude the different

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behavior of Share Price of Nepalese Commercial Banks. Among these, 16 respondents were

Sh
an

professional investors of Share investment where rests of 9 were potential investors who are willing
to invest in share but have not invested yet. Likewise, the respondents can be classified in terms of
their age and sex as given in Table No.4.39.
Table: 4.39
Classification of Respondents
S.N

Basis of Classification
1

No. of Respondents

Percentage

Occupation
Professional Investors

16

64%

Potential Investors

36%

Total

25

100%

Below 25

12%

25 to 40

17

68%

Age

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20%

Total

25

100

Male

19

76%

Female

24%

Total

25

100

Under SLC

4%

Higher Secondary

12%

Graduate

13

52%

Post Graduate

32%

Total

25

ry

Academic Qualification

100

Shanker Dev Campus Library

Sex

(Source: Field Survey)

sL

ib
ra

Above 40

pu

As given in table, 76% of the respondents were male where as 24% were female. Similarly, 12% of

Ca
m

the respondents were from the age group below 25 years, 68% were below 25 to 40 years and 20%

ev

were 40 above.

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The general finding of the survey has been presented and analyzed below:

Sh
an

ke

4.6.2 Purpose of Share Investment

The first question asked to the respondents to declare their purpose of the investment. Table No. 4.40
shows the results of the respondents:
Table: 4.40
Purpose of Share Investment
S. N

Responses

No. of Respondents

Percentage

To earn profit

19

76%

For safe investment

12%

To help capital mobilization

12%

25

100

Total

(Source: Field Survey)

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The above table shows the number of respondents and their percentage relating the purpose of share
investment in Nepalese Share Market. It clears that majority (76%) of Nepalese investors invest their
savings for the purpose of earning maximum profit. They believe that share investment is an
important way of earning profit and hence they invest. Only 12% and 12% of the respondents gave
the response as they invest their savings for the purpose of making money safe and to help the capital

Shanker Dev Campus Library

mobilization hence earning money respectively.


It can be shown in pie chart (Figure No. 15) as follows:

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ra

ry

Purpose of Share Investment

12%

sL

To earn profit

Ca
m

pu

12%

For safe investment


To help capital
mobilization

rD

ev

76%

Sh
an

ke

Figure No. 15: Purpose of Share Investment

4.6.3 Reason of Public attraction in Commercial Banks

The reason for the attraction towards the investment in Commercial Banks of Nepal was as a next
question. The responses were obtained as shown in Table No.4.41
Table: 4.41
Reason of Public attraction in Commercial Banks
S.N.

Responses

No. of Respondents

Percentage

Continuous Declaration of Dividend

36%

Market Phenomena

12%

Banks are better controlled/ managed

13

52%

25

100

Total

(Source: Field Survey)

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The above table shows the different reasons for the greater attraction of general public toward the
investment in the share of Commercial Banks. It shows that slight higher percentages (52%) in
comparison with others, of total respondents are convinced to declare that banks are better managed
and hence they are being the attraction of all. Likewise, 36% of the total respondents stated that they
tend to invest in Commercial banks due to their continuous declaration of dividend. And rest 12%

investment in Commercial Banks.


It has been shown in the following chart (Figure No.16):

Continuous
Declaration of Dividend

pu

36%

sL

ib
ra

ry

Reasons of Public attraction in the shares of


Commerdcial Banks

Market Phenomena

Ca
m

52%

Banks are better


controlled/ managed

rD

ev

12%

Sh
an

ke

Figure No.16: Reason of Public attraction in the Share of Commercial Banks

4.6.4 Public Awareness about Share Investment

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stated that the market phenomenon is the main cause that attracts the general public for share

It has been revealed from the study that 56% of the Nepalese investors are aware about the share

market and the market and the market phenomenon of the share. 40% of the respondents said that
they are investing in share without proper knowledge about share. They said that they are investing

in share because of they are influenced by some relatives or friends to earn profit. Rest 14% of the
respondents wanted to say nothing about this.

The finding of the study has been shown in the following table:

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Table: 4.42
Public Awareness about Share Investment
Responses

No of Respondents

Percentage

Yes - Aware

14

56%

No Not aware

28%

Cant say

16%

25

100

Total

Shanker Dev Campus Library

S.N

(Source: Field Survey)


The above finding can be presented in Pie Chart as follows (Figure No.17):

ib
ra

ry

Public Awareness on Share Investment

Ca
m

pu

sL

16%

56%

No Not aware
Cant say

ke

rD

ev

28%

Yes - Aware

Sh
an

Figure No.17: Public Awareness on Share Investment

4.6.5 Status of Present Laws & Polities

The responses for the perfection of present laws and policies about buying and selling of share
revaluated the following results:
Table: 4.43
Status of present Laws & Policies
S.N

Responses

No of Respondents

Percentage

Yes Perfect

12

48%

No Not Perfect

20%

Dont Know

32%

25

100

Total

(Source: Field Survey)

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The table is presented in the form of Pie Chart below (Figure No.18):
Status of Present Laws and Policies

Yes Perfect
48%

No Not Perfect
Dont Know

ib
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ry

20%

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Figure No.18: Status of Present Laws and Policies

Shanker Dev Campus Library

32%

pu

Table No.4.43 shows that almost half (48%) of the investors feel themselves that the prevailing laws

Ca
m

and policies regarding buying and selling of share are perfect. About one fifth (20%) of the

respondents said that they dont know anything about the laws and policies. And 32% of the

ev

respondents said the present laws and policies are not perfect to regulate the Share Market

rD

Proficiently.

ke

4.6.6 Role of EPS in the Determination of Share Price

Sh
an

The responses for the question where EPS is the main determiner of Share Price or not the following
results found:

Table: 4.44

Higher EPS Indicates Higher Share Price


S.N

Responses

No. of Respondents

Percentage

Strongly Agree (SA)

36%

Agree (A)

12

48%

Undecided (U)

12%

Disagree (D)

4%

Strongly Disagree (SD)

0%

Total

25

100

(Source: Field Survey)

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Table No.4.44 shows that most of the respondents agree that EPS is the main determiner of share
price. 36% of the total respondents who agree the statement strongly were highly convinced that EPS
is the main determiner whereas 48% stated they agree the statement. In this way, 84% of the total
respondent agrees the statement. Only remaining 16% stated they were either undecided (12%) or
disagree (4%). From this we can conclude that the investors think that EPS is the major tool for the

This can be presented in Pie -Chart as follows (Figure No.19):

ry

Higher EPS Indicates Higher Share Price

ib
ra

4%
0%

12%

Agree (A)

Ca
m

pu

36%

sL

Strongly Agree (SA)

Disagree (D)
Strongly Disagree
(SD)

ke

rD

ev

48%

Undecided (U)

Sh
an

Figure No.19: Higher EPS indicates Higher Share Price

4.6.7 Role of Dividend Pattern in the Determination of Share Price

Shanker Dev Campus Library

Nepalese investors to analyze whether the organization is best enough to invest or not.

The responses of the respondents regarding the role of dividend pattern in the determination of share
price are summarized and presented in Table No.4.45.

Table: 4.45
Role of Dividend pattern in Share Price Determination
S.N

Responses

No. of Respondents

Percentage

Strongly Agree (SA)

24%

Agree (A)

14

56%

Undecided (U)

12%

Disagree (D)

8%

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5

Strongly Disagree (SD)


Total

0%

25

100

(Source: Field Survey)

Table No.4.45 clears that Dividend pattern plays a great role on the determination of share price. In
the field survey 56% of the respondents agree that higher rate of Dividend results the good share

Shanker Dev Campus Library

price. 24% of the respondents strongly agreed the statement that dividend pattern in share price

determination. The remaining 20% stated that either they were undecided (12%) regarding the matter
or disagree (8%).

ry

It has been presented in Figure No.20.

0%

pu

8%

sL

ib
ra

Dividend Pattern Matters in Share Price


Determination

24%

Ca
m

12%

Strongly Agree (SA)


Agree (A)

ev

Undecided (U)

rD

Disagree (D)
Strongly Disagree
(SD)

Sh
an

ke

56%

Figure No.20: Dividend Pattern matters in share price determination

4.6.8 Role of Company Assets Structure

The following table (Table No.4.46) shows the responses gained against the statement that Company
Assets Structure indicates higher share price.
Table: 4.46
Role of Company Assets Structure in Share Price Determination
S.N

Responses

No. of Respondents

Percentage

Strongly Agree (SA)

8%

Agree (A)

24%

Undecided (U)

12

48%

Disagree (D)

16%

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5

Strongly Disagree (SD)


Total

4%

25

100

Source: Field Survey)


The above table shows that the Company Assets Structure plays no important role in the
determination of share price in the view of respondents. That is why, almost half (48%) of the
respondents neither agrees nor disagree the statement and choose to say undecided. Only 8% were

choose disagree and strongly disagree were 16% and 4% respectively.

ib
ra

ry

Figure No.21 shows the graphical explanation of the above results.

8%

Strongly Agree (SA)


Agree (A)

24%

Sh
an

ke

rD

ev

16%

Ca
m

4%

pu

sL

Role of Company Assets Structure in Share


Price Determination

48%

Undecided (U)
Disagree (D)
Strongly Disagree
(SD)

Figure No.21: Role of Company Assets Structure in Share Price Determination

4.6.9 Role of Capital Structure

Shanker Dev Campus Library

strongly agreed whereas 24% choose to agree the statement. The percentages of the respondents who

The responses of the respondents regarding the role or Capital Structure in the determination of share
price are summarized and presented in the table given below:

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Table: 4.47
Good Capital Structure Indicates Higher Share Price
Responses

No. of Respondents

Percentage

Strongly Agree (SA)

12%

Agree (A)

11

44%

Undecided (U)

20%

Disagree (D)

16%

Strongly Disagree (SD)

8%

Total

25

100

Shanker Dev Campus Library

S.N

ry

Source: Field Survey)

ib
ra

The above table (Table No.4.47) shows that the Capital Structure of organization is responsible to

sL

determine their share price. More than half (12% strongly agreed and 44% agreed) of the respondents
agree that better Capital Structure is responsible for the higher Share Price. 20% were undecided

pu

whereas 16% and 8% were disagreeing and strongly disagree to the statement. It has been presented

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m

in Graphical form in Figure No.22.

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ev

Good Capital Structure Indicates Higher


Share Price

12%

Strongly Agree (SA)

ke

8%

16%

Sh
an

Agree (A)

20%

Undecided (U)
Disagree (D)
44%
Strongly Disagree
(SD)

Figure No.22: Role of Capital Structure in Share Price

4.6.10 Role of Political Fluctuation


The role of political fluctuation in Share Price was observed and found the results as shown in Table
No.4.48.
Table: 4.48

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Political Situation Changes the Share Price
Responses

No. of Respondents

Percentage

Strongly Agree (SA)

28%

Agree (A)

12

48%

Undecided (U)

12%

Disagree (D)

12%

Strongly Disagree (SD)

0%

Total

25

100

Shanker Dev Campus Library

S.N.

Source: Field Survey)

ry

The above table shows that the national political environment is also responsible on the

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determination of share price because more political fluctuation cause the decrease in Share Price. It

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was revealed that 14% of the total respondent agree the say that political situation because the
change in share price whereas 28% strongly agreed it. 12% were undecided and 12% said to disagree

Ca
m

pu

the statement. It is presented in graphical form in Figure No.23.

rD

ev

Political Situation Change the Share Price

0%

Sh
an

12%

ke

12%

Strongly Agree (SA)


28%
Agree (A)
Undecided (U)
Disagree (D)
Strongly Disagree
(SD)

48%

Figure No.23: Role of Political Situation Change in Share Price

4.6.11 Effect of AGM and BOD Election in Share Price


The following table (Table No.4.49) shows the effect of Annual General Meeting and Election of
Board of Directors in share price.

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Table: 4.49
AGM and Election of BOD effect on Share Price
Responses

No. of Respondents

Percentage

Strongly Agree (SA)

12%

Agree (A)

10

40%

Undecided (U)

20%

Disagree (D)

12%

Strongly Disagree (SD)

16%

25

100

Total

Shanker Dev Campus Library

S.N

Source: Field Survey)

ry

The above table shows that the Annual General Meeting and election of Board of Directors

ib
ra

influences the Share Price. It was observed that 40% of the total respondents were agreed and 12%

sL

were disagreed. In the same way, 20% of the respondents were undecided and there were 12% and
16% respectively under disagreed and strongly disagreed group. It has been presented in Pie Chart

Ca
m

pu

below (Figure No.24):

12%

Strongly Agree (SA)

Sh
an

ke

16%

rD

ev

AGM and Election of BOD effect on Share


Price

Agree (A)

12%

Undecided (U)

40%

20%

Disagree (D)
Strongly Disagree
(SD)

Figure No.24: Effect of AGM and BOD in Share Price

4.6.12 Company Risk vs. Share Price


The respondents gave the following results (Table No.4.50) against the statement that whether the
higher risk of the company results higher share price or not.

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Table: 4.50
Higher the risk, More the Share Price
Responses

No. of Respondents

Percentage

Strongly Agree (SA)

0%

Agree (A)

16%

Undecided (U)

24%

Disagree (D)

12

48%

Strongly Disagree (SD)

12%

25

100

Total

Shanker Dev Campus Library

S.N.

Source: Field Survey)

ry

The above table (Table No.4.50) shows that the Annual General Meeting and election of Board of

ib
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Director dont significantly influence the share price of the company. 48% of the respondents

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disagreed that the higher risk of company result increases in share price whereas 24% were

pu

undecided. Likewise, 16% agreed the statement and 12% strongly disagreed the statement.

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The figure given below (Figure No.25) shows the respondents response against the risk factor of
share price change.

rD

ev

Higher the Risk, More the Share Price

0%

16%

Strongly Agree (SA)

Sh
an

ke

12%

Agree (A)
Undecided (U)
24%

48%

Disagree (D)
Strongly Disagree
(SD)

Figure No.25: Role of Risk in Share Price Determination

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Putalisadak, Kathmandu
4.6.13 Most Influential Determinant of Share Price
The respondents were asked to rank the variables that influence the share price to conclude the most
influencer of share price. The researcher got the following result.

Table: 4.51
Variables

Rank

Total

EPS

12

25

DPS

11

25

Assets

Capital

Political

10

AGM

13

Total

25

25

25

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13

10

25

25

25

25

25

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25

Source: Field Survey)

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25

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Most Influential Determinant of Share Price

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Table No.4.51 shows the summary of respondents response against the question to rank different

variables that influence the share price. Rank 1 implies the most influencing factor and so on. It has

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also been interpreted in APPENDIX III. As Table No.4.51 and APPENDIX-III shows, EPS is

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ranked to be the first determiner of share price. Likewise, DPS is the second determiner of share
price followed by the political situation of the country. Likewise, AGM and election of BOD was

chosen to the next determiner of share price followed by capital structure and assets structure

respectively. Except for in the case of EPS and DPS, both professional and potential investors gave
the same result and same ranking for all the variables. It was found the professional investors

emphasize EPS but potential investors who are willing to invest in share price of bank in future
emphasize DPS for their investment.

4.7 Major Findings of the Study


On the basis of primary as well as secondary data analyzed, the major findings of the study can be
summarized as below:

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DPS of BOK is more volatile in comparison to MPS, BPS and EPS. Bank of Kathmandu has
positively correlated between their Market Price per share and DPS, BPS. However, the
relations are insignificant at 95% level of confidence.
BPS and EPS are positively correlated in the case of Everest Bank Limited whereas DPS is
negatively correlated. The relation is insignificant at 95% level of confidence. DPS is more

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volatile in comparison with MPS, BPS and EPS.


In the case of Himalayan Bank Limited, MPS is positively correlated with DPS and EPS

whereas negatively correlated with BPS. The relation with DPS and EPS are significant
whereas relation with BPS is insignificant at 95% level of confidence. The volatility of MPS,

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EPS and BPS seems to be less than DPS.

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Laxmi Bank has not distributed any dividend yet. Volatility of BPS seems to be more than
MPS and BPS in case of this bank.

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Lumbini Bank has not distributed dividend in the period of 2000/01 to 2005/06. the earning

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of this bank seems to be negative, meaning that the financial strength of this company is still

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not strong. Hence, the book value in the later year has been decreased and the total
capitalization of the organization has also been decreased. MPS of this bank has significantly

positive correlation with BPS but it has insignificant correlation with EPS at 95% level of

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confidence.

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Machhapuchhre Bank has positive correlation with DPS, BPS and EPS. Hence, they

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influence the Share Price positively. The trend of MPS, EPS and DPS shows that the

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company is in good trend in later years. However, the relation with DPS is insignificant at
95% level of confidence. The volatility of DPS is much more than other indicators like MPS,
BPS and EPS.

NABIL Banks DPS is more volatile than other indicators like MPS, BPS and EPS. The MPS

of this Bank is positively correlated with DPS, BPS and EPS meaning these indicators
influence their share price directly. But the relation is insignificant at 95% level of
confidence.

The variability of BPS and EPS of NCC bank is very high. Due to the unavailability of
required data, no relation of MPS can be observed for the NCC bank.
MPS of Nepal Bangladesh Bank is positively correlated with all the indicators examined i.e.
DPS, BPS and EPS. For NBBL and is significant at 95% level of confidence. The volatility
of DPS is more than other indicators like MPS, BPS and EPS.

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For Nepal Industrial and Commercial Bank, the correlation coefficient is positive between
MPS with BPS, EPS and DPS. However, the relation is insignificant at 95% level of
confidence, the relation is not significant. The volatility of DPS is higher than that of other
indicator MPS, BPS and EPS.
For Nepal Investment Bank, Market price is positively correlated with DPS, BPS and EPS.

than that of other indicators MPS, BPS and EPS.

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But at 95% level of confidence, the relation is not significant. The volatility of DPS is higher

The MPS of Nepal SBI Bank is positively correlated with DPS and BPS whereas negatively
correlated with EPS. It shows that DPS and BPS are more responsible to increase the share

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price of the organization. The relation with BPS and EPS is insignificant at 95% level of

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confidence.

The volatility of EPS of Siddhartha Bank is very high in comparison with that of BPS. Due to

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the unavailability of required data, no relation of MPS can be analyzed for this bank.

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The degree of CV for Standard Chartered Bank is less than that of other bank. It shows the

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consistency in these indicators. MPS of SCBL is positively correlated with DPS, BPS and

EPS indicating that increase in these factors cause increase in MPS. However the relation is
not significant at 95% level of confidence.

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the Banks.

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The correlation between MPS and other indicators are found to be insignificant for most of

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On the basis of Standard Deviation it can be concluded that Market Price per share of Nabil

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Bank and Standard Chartered Bank seems to be more risky. The higher CVs of Nepal SBI

Bank and Nepal Bangladesh Bank show that their Market Prices are more volatile than
others.

Standard Deviation of Book Value per Share shows that Lumbini Bank and NCC Bank are

riskier than others. Volatility of Book Value is greater in the case of NCC Bank and Lumbini
Bank.

Dividend per Share is more volatile in case of Nepal Bangladesh Bank and Machhapuchhre
Bank Limited in comparison to other banks.
Highest Standard Deviation and CV of Lumbini Bank and Nepal Bangladesh Bank imply that
they are more volatile and inconsistent than others.
Basically, most of the investors are intended to maximize their profit through share
investment. They think share as a good sector of investment assuming that it gives a good
return in short and long term.

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The majority of investors declare themselves as informed investors but still Nepalese
investors lack the proper knowledge about the share market.
The majority of Nepalese investors found to be either unknown about laws or likes to say
imperfect policies causing the problem in share market.
Majority of the investors are convinced that higher EPS cause higher share price.

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Dividend pattern plays a great role on share price movement. Higher the DPS, more will be
the share price. Most investors like to analyze the dividend pattern of the bank before they
invest in share.

Company assets structure and capital structure of the company plays moderate role on share

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price movement, the potential investors tend to consider the assets and capital structure of the

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organization second to EPS and DPS analysis.

Political fluctuation cause change in share price. They influence share market in a very direct

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way. It means that fluctuating political situation badly damage the share price of an

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organization whereas stable political condition of the country is much favorable for upward

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movement of share price.

AGM and Election of BOD also plays moderate role on share price movement. Good

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signaling after General Meeting could influence the market price of share.

The risk of organization does not significantly influence the share price. Most of the Nepalese

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investors are risk avoider, who never wants to see the risky organization for their investment.

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CHAPTER V
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter presents the summary, conclusions and recommendation derived from analysis of the
study. The study was conducted to find out the movement of stock price of commercial banks. The

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chapter consists of three sections; the first section provides the summary of the study; the second

section draws the conclusion of the study. Finally, the third section proposes recommendations to

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solve the problems observed on the basis of the findings

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5.1 Summary

The study deals about the share price behavior of listed commercial banks in Nepal. The Nepalese

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capital market is in the developing phase. Different new technologies are adopted and uses. Central

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depository system is upcoming technologies in Nepalese market. Different political philosophies and

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rules and regulations governed by the government used to affect the Nepalese capita market time and

again. Nepalese Stock Market is in developing stage. Generally speaking, most of the people citizens

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are still unaware of stock market. Though share market plays the vital role on mobilization of capital

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in national economy, in the case of Nepal, it is still crawling towards the betterment.

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The history of Security Market in Nepal is not old. It was started with the floatation of share by

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Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937. Introduction of Company Act in 1964, the
first issuance of Government Bond in 1964and the establishment of Securities Exchange Center Ltd.
in 1976 were significant developments of the Capital Market in Nepal

Investors invest their savings in the Common Stock of public companies through Primary and

Secondary Markets. Generally, the investors aimed to maximize their profit from their investment.

But due to lack of proper knowledge and poor regulatory performance of Nepalese Capital Market,
the investors may not achieve return as expected. Only the few educated city dwellers know what
share market is and how they are regulated. Besides, government has not prioritized the development
of capital market sufficiently.

The emerging trend of Nepalese share market shows that new investors are being very interested in
share investment. But it has been observed that most of the investors are interested to invest their

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savings in commercial banks. There is very less interest in other manufacturing or service sectors of
business.

The prime objective of this study is to find the major determinants of Share Price of Nepalese
Commercial Banks. Hence, all 15 Commercial Banks presently listed in NEPSE are taken in

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consideration for the purpose. Market Price of these banks has been analytically tested here to
compare with other financial indicators like DPS, EPS and BPS. For analytical purpose, secondary
data was gathered from different sources and different statistical tools have been used to analyze the
same. Not only this, a set of question of 12 questions were prepared and presented to 25 respondents

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to collect primary data related to share price on Nepalese Commercial Banks. Response from

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respondents has been analyzed thoroughly in this thesis.

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This study is focused on the analysis of the relation of MPS with the major financial indicators like

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BPS, DPS and EPS. The trend of MPS has been tested for the period of last six years. On the basis of

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such data, the determinants of share price have been observed. Different statistical as well as
financial tools have been used to interpret the data in scientific manner.

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This study shows that MPS is positively correlated with DPS, BPS and EPS in most of the cases. But

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they seem to be insignificant because other factors rather than these financial indicators are also

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affecting the Share Price. Theoretically, when earning, dividends and book value increases, the

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market per share also increases and vice versa. But it is not always true that other factors are also
responsible to determine the share price.

It has been revealed that the individual indicators do not significantly influence the share price. It

may be influenced by these indicators to some extent but not always and not for all the banks. The
combine effect of these financial indicators may influence the share price. However, it has been
revealed that EPS is the first factor that determines the share price followed by DPS. Likewise there

are other factors too that directly influence the share price. For example, the managerial position of
the organization, company assets and capital framework, national and international political as well
as social scenario are other factors that determine the share price.

This study covers the analysis of share price determiners of Nepalese commercial banks for the
period of past six years.

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5.2 Conclusion
After analyzing the Primary and Secondary data, the following conclusions have been achieved:

Due to the inadequate knowledge of share market among Nepalese investors, capital market
of Nepal has not been well developed yet.

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The investors generally tend to earn profit from share and they think that EPS and DPS are
prime factors to be analyzed and to be considered before investing their savings on Share
Price.

Most investors are known about laws and policies regarding share market. Poor rules and

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regulations as well as ineffective regulatory mechanism of market are the problems of

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Nepalese Capital Market.

The MPS of most of the banks are found to be correlated with other individual financial

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indicators like BPS, EPS and DPS insignificantly. This shows that they individually rarely

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influence the share price of the organization.

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influence share price but they have combine effect on it. There can be other factors which

The reason why commercial banks are only the attractive sector to invest, in the view of

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investors is that they are better managed and control, that is why they are in profit and

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distribute good rate of dividend.

Market price per share of most of the banks is insignificantly correlated with all the indicators

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(DPS, BPS and EPS) in most of the cases. This implies that they individually dont influence

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the share price but they jointly influence the share price. There can be other factors to which
influence the share price.

EPS and DPS are the major influencer of the share price. Besides this, political situation,
annual general meeting, assets structure and capital structure of the organization also
influence the share price of the company.

The commercial banks are the first choice of Nepalese investors. But the systematized and
managed regulatory system is required for further improvement of share market.

The reputed and established commercial banks have very good trend of their financial
performance whereas new banks are penetrating their market. Most of the banks are operating
in profit in recent years though they suffered some losses during their initial stages. Still, the
investors are positive towards the share of these banks.

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5.3 Recommendations
On the basis of analysis and findings of the study, following strategies have been recommended to
overcome weakness, inefficiency and to improve the overall stock market in Nepal.

At present the service of the market is limited to Kathmandu only. The issuance of some

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legislation in 2007 governing stock market opened a door for the establishment of another
stock exchange. SEBON should conduct a study on the feasibility and need for and
establishment of regional stock exchange to the general public.
To promote a healthy and competitive share market and

to check

monopoly and

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undue speculation it is important to have adequate market intermediaries in the stock

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exchange. Although the NEPSE is in the process of increasing the stock brokers to 50, it is
important that the NEPSE conduct a proper research to ensure that there are enough brokers

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and market intermediaries for a competitive

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Since general publics are unaware about the share and share market, an organized effort is

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necessary to aware the publics about it. A separate department in NEPSE or an independent
organization is recommended which analyzes, inform and create the awareness within the

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emerging potential investors about share and share market through different approaches like

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seminar, conference or print, air media.

To control the speculation in share, an effective control mechanism is necessary. A clear

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system is to be employed to evaluate and punish such speculations so that no further

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influence can be observed in share price due to artificial reasons. The government should
create a rational and sincere environment within share brokers and share traders for
controlling such speculations.

The investors perceive the increase in EPS as better performance of the organization and
hence they increase the demand of share which ultimately causes the increase in share price.

Government should formulate and implement a rigid rules and regulations for the further

development of share market. A mechanism to take immediate action against fraud


companies is to be established.
The investors are recommended to receive a clear picture of their financial track before
investing. They should be alert and aware about the misconduct of relative company, brokers,
NEPSE or government. They are required to boost their knowledge up regarding share and
share market to get the expected returns from their investment.

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An open policy to encourage and promote foreign investors in share price would be fruitful to
strengthen the share market of Nepal considering the fact of present globalization.
For more specific result regarding the determinants of share price, a population study of
whole share market for a longer study period is required. This gives the only factual
information about the actual determinants of share price.

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All stakeholders are required to be provided up-to date information to the present and
potential investors regularly so that they can be an informed about the market scenario,

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potentials and their investment.

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BIBLIOGRAPHY
Books:
Bhall, V.K. (1983). Investment Management. New Delhi: S. Chand and Company Ltd.
Bhandari, D. R. (2003). Principle and Practice of Banking and Insurance. Kathmandu: Asia

Bhattarai, P. (2002). Capital Market in Nepal. Kathmandu: Asmita Books and Stationeries.

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Publications.

Bhattrai, R. (2002). Share Market of Nepal. Kathmandu: Buddha Academic Publisher & Distributers
Pvt. Ltd.

Bhrigham, E.F.,Gapenski L.C. (1999). Intermediate Financial Management. USA: The Dryden

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Press

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Gupta, S. C. (1999). Fundamentals of Statistics. Delhi: Himalayan Publishing House


Hampton, J.J. (1998). Financial Decision Making. New Delhi: Prentice Hall of India Pvt.

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Hornby, A. S. (2000). Oxford Advance Learners Dictionary. New Delhi: Oxford University Press.

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Joshi, P. R. (2001). Research Methodology. Kathmandu: Buddha Academic Publishers and

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Distributors Pvt. Ltd.

Pandey, I. M. (1995). Financial Management. Delhi: Vikash Publishing House Pvt. Ltd.

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Sharpe, Alexander, and Biley. 2001. Investment. New Delhi: Prentic Hall of India P. Ltd.

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Weston, J. F. & Brigham, E. F. (1987). Essentials of Managerial Finance. Orlando: The Dryden

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Press.

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Thesis:

Baniya, B. (2008). Share Price Behavior of Commercial Banks & Effect of Macroeconomic
Variables in Nepalese Stock Market. Kathmandu: An Unpublished Masters Degree Thesis.
Faculty of Management, Saraswati Multiple Campus, T. U.

Devkota, S. (2008). Stock Price Determinants in Nepal Stock Exchange. Kathmandu:


AnUnpublished Master's Degree Thesis submitted to Faculty of Management, T.U.

Gautam, R. (2005). A Study on the Behavior of Stock Market Price in Nepalese Security Market.
Kathmandu: An Unpublished Masters Degree Thesis. Faculty of Management, Shanker Dev
Campus, T. U.

Gurung, J.B. 1999. Share Price Behaviour of Listed Companies in Nepal. Pokhara: An Unpublished
Masters Degree Thesis. Prithivi Narayan Campus, T. U.
Paudel, L. (2001). A Study of Share Price Movements of Joint Venture Commercial Banks in Napes.

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Kathmandu: An Unpublished Masters Degree Thesis. Shanker Dev Campus, T. U.
Prajapati, R. (2009). A Stock Market Behaviour of Listed Companies in Nepal. Kathmandu: An
Unpublished Masters Degree Thesis. Faculty of Management, Shanker Dev Campus, T. U.
Shrestha, S.C. (1999). A Study on Stock Price Behaviour in Nepal. Kathmandu: Unpublished

Journals and Articles:

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Masters Degree Thesis. Public Youth Campus. T. U.

Adhikari, N. (Oct.2005). Securities Market Development in Nepal. Kathmandu: SEBON Journal Pvt.

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Ltd.

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Baral, K & Shrestha, S.K. (2006). Daily Stock Price Behavior of Commercial Banks in Nepal. The

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Journal of Nepalese Business Studies. Kathmandu: T. U.

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Gurung, J.B. (2004). Growth & Performance of Securities Market in Nepal. The Journal of Nepalese
Business Studies. Kathmandu: T. U.

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Sharma, B. (June 2001). Nepals only Capital Market in Shambles. Kathmandu: Business Age

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www.himalayanbank.com

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www.bok.com.np

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Websites:

www.investorsguide.com
www.kumaribank.com
www.laxmibank.com
www.lumbinibank.com

www.machhapuchhrebank.com
www.nabilbank.com
www.nbbl.com.np
www.nccbank.com.np

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www.nepalsharemarket.com
www.nepalstock.com
www.nibl.com.np
www.nicbank.com.np

www.sebonp.com
www.siddharthabank.com

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pu

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www.standardcharteredbank.com/np

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www.nrb.org.np

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APPENDIX - I
Questionnaire
Dear sir/ Madam,
This is to bring your kind information that this is an attempt to identify the root determinants of share

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price of Nepalese Commercial Banks listed in NEPSE for the partial fulfillment of Thesis required

for MBS degree, TU. Please you are kindly requested to fill up the following questionnaire with the
best answer in your view. I would be grateful to you for the contribution of your valuable time and
efforts.

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Thank you.

Surya Raj Gautam

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(Researcher)

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Master of Business Studies

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Shanker Dev Campus, T.U.

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Respondents:

] F[

] Age:

Years

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Occupation (Tick One):

Sex: M [

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Name:

] Professional Share Trader

] Others and interested in share investment

] None of others

Academic Qualification (Tick appropriate):


[

] Under SLC

] Higher Secondary

] Graduate

] Post Graduate

Questions:

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Please Tick the best alternative (Q.No.1 to 4)

] To earn maximum profit

] Safe investment

] Help capital mobilization

] Others (if any).

2. It has been observed that the share investors of Nepal are highly attracted in the share

] Market Phenomenon

] Banks are better controlled/ managed

] Others ..

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] Continuous Declaration of Dividend

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Commercial Banks for their investment. What do you think is the prime cause of this?

No [

Cant Say [

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Yes [

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3. Do you think that Nepalese investors are aware about the share investment decision?

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4. Do you think that the prevailing laws and policies regarding the buying and selling of shares are
perfect?

No [

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Dont Know [

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Yes [

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Please indicate with the appropriate letter(s) in the gap to which extent do you agree with the
following statements by filling in the blanks provided. (Q.No.5 to 11)
SA

for

Strongly Agree

for

Agree

for

Undecided

for

Disagree

SD

for

Strongly Disagree

5. EPS is the main determiner of Share Price because higher EPS indicates higher Share
Price.

6. Dividend Pattern plays vital role on the determination of Share Price because higher
the DPS more will the Share Price

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1. Which one do you think is major purpose of Nepalese to invest in financial market?

of

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7. Good Company Assets Structure indicates higher share price..
8. Better Capital Structure results share price..
9. Political situation also cause the change in share price
10. Annual General Meeting and the election of Board of Director influence the share
price.

Please Rank 1, 2, 3 (Q.No.12)


12. Which of the following do you think affect the share price of the company? Rank

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1, 2,3,4,5 and 6 to each heading [1for the best factor]

Earning per Share

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Dividend per Share

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Company Assets

Political Situation

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AGM/ Election of BOD

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Capital Structure

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11. Higher the risk of the company, higher will be the share price

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APPENDIX II

Name of Respondents

Age

Sex

Occupation

Academic Qualification

Dol Raj Pathak

27

Professional Investor

Post Graduate

Umesh Paudel

29

Professional Investor

Graduate

Raju Dumre

28

Professional Investor

Graduate

Puspa Gyawali

41

Potential Investor

Under SLC

Arjun Gautam

30

Professional Investor

Higher Secondary

Baburam Gautam

50

Potential investor

Arjun Raj Gautam

30

Professional Investor

Higher Secondary

Umesh Paudel

31

Professional Investor

Post Graduate

Shankar Pandey

28

Professional Investor

10

Yogendra Panthi

30

11

Gururaj Pandey

35

12

Kamal Neupane

31

13

Shyam Subedi

26

14

Dinesh Pandey

15

Surya Prasad Subedi

16

Anju Dhakal

17

Maya Gaire

18

pu

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S.N

Higher Secondary

Post Graduate
Post Graduate

Professional Investor

Post Graduate

Professional Investor

Post Graduate

Professional Investor

Post Graduate

Potential Investor

Post Graduate

42

Potential Investor

Graduate

44

Potential Investor

Graduate

26

Professional Investor

Graduate

Ganesh Dhakal

30

Professional Investor

Graduate

19

Sangita Bhusal

26

Professional Investor

Graduate

20

Ritika Pantha

23

Potential Investor

Graduate

21

Krishna Prasad Sharma

22

Potential Investor

Graduate

22

Bhagawati Joshi

27

Potential Investor

Graduate

23

Amit Chaudhary

26

Professional Investor

Graduate

24

Narayan Pandey

27

Potential Investor

Graduate

25

Sharmila Subedi

23

Professional Investor

Graduate

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Professional Investor

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47

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List of Respondents

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APPENDIX III
Rank wise No of Responses of Survey Result
Rank
S.N.

Variables

Total
1

Weighted

Meant

Overall

Value

Wt.

Rank

12

25

46

1.84

DPS

11

25

47

1.88

Assets

13

25

134

5.36

Capital

10

25

4.68

Political

10

89

3.56

AGM

13

25

93

3.72

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25

117

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EPS

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ANNEX-IV

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

1825
47.37
230.67
54.68

3132
30
321.77
91.82

2455
30
313.64
99.99

1980
45
247.95
62.74

1760
43.56
256.52
61.90

1005
10.53
128
16.35

700
10.58
132
22.04

1113
20
125.45
166.45

1062
5
12.24
20.7

631
0
29.5
32.91

435
0
86.95
30.31

1285
21.05
142
10.35

420
115
8.33

Property of Shanker Dev Campus Library,


Putalisadak, Kathmandu - 125

Shanker Dev Campus Library

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

2350
42.11
213.60
59.94

ib
ra

sL

pu

Sh
an

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

Ca
m

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

ev

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

rD

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

ke

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

Bank of Kathmandu
295
430
850
1375
10
15
48
20
229.09 171.83
192.52
218.38
27.50
30.10
43.07
43.50
Everest Bank Limited
680
870
1379
2430
20
30
171052
219.87
217.67
280.82
45.58
54.22
62.78
78.42
Himalayan Bank Limited
840
920
1100
1740
20
31.58
35
40
244.33
239.59
228.72
264.74
49.05
47.91
59.24
60.66
Kumari Bank Limited
269
443
830
21.05
21.05
114
141
149
137
9.74
17.58
16.59
22.7
Laxmi Bank Limited
156
285
368
690
101.28
98.87
106.41
115.66
1.9
4.34
5.8
10.75
Lumbini Bank Limited
180
172
505
0
0
0
84.71
49
-144.42
-71.61
5.33
-39.35
-161.21
32.07
Machhapuchhre Bank Limited
265
320
620
15.79
116
130
122
15.43
18.74
9.02

ry

SUMMARY OF FINANCIAL INDICATOR

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu

ib

sL

pu

am

ev
C

ke
rD

an

Sh

2008/09
4899
85
324
106.76
335
0.078
29.35
280
60
116.01
1126
0.79
145.58
27.83
1388
20
162
37.42
1900
42.11
194.68
36.18

Property of Shanker Dev Campus Library,


Putalisadak, Kathmandu - 126

Shanker Dev Campus Library

2003/04 2004/05 2005/06 2006/07 2007/08


NABIL Bank Limited
Market Price per Share
1000
1505
22.40
5050
5275
Dividend Per Share
65
70
85
140
100
Book value per Share
301
337
381
418
354
Earning per Share
92.61
105.49
129.21
137.08
108.31
NCC Bank Limited
Market Price per Share
120
94
316
457
Dividend Per Share
Book value per Share
0.027
0.365
-0.044
-0.073
0.049
Earning per Share
0.06
-0.74
-84.77
-16.57
35.53
Nepal Bangladesh Bank Limited
Market Price per Share
354
265
199
550
1001
Dividend Per Share
Book value per Share
182
188
-117
-364
-295
Earning per Share
0.73
1.58
80.16
Nepal Industrial and Commerce Bank LImited
Market Price per Share
218
366
496
950
1284
Dividend Per Share
0
30
10.53
1.05
1.05
Book value per Share
124.09
136.84
127.44
139.16
138.029
Earning per Share
13.65
22.75
16.1
24.01
25.75
Nepal Investment Bank Limited
Market Price per Share
940
800
1260
1729
2450
Dividend Per Share
15
12.5
55.46
30
40.83
Book value per Share
247
201
240
234
223
Earning per Share
52
40
59.35
62.57
58
Nepal SBI Bank Limited
Market Price per Share
307
335
612
1176
1511
Dividend Per Share
0
0
5
47.59
Book value per Share
146.8
159.54
151.78
178.04
160.57
Earning per Share
14.26
13.29
18.27
29.35
28.33

ra
ry

Indicators/Year

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu

ib

sL

6010
100
327.53
109.99

Sh

an

ke
rD

ev
C

am

pu

6830
130
401.52
131.92

1000
10.53
134.29
22.89

Property of Shanker Dev Campus Library,


Putalisadak, Kathmandu - 127

Shanker Dev Campus Library

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

Standard Chartered Bank Limited


1745
2345
3775
5900
110
120
140
130
399.25
422.38
468.22
52.11
143.55
143.14
175.84
167.36

1090
15.79
130.39
17.29

ra
ry

Market Price per Share


Dividend Per Share
Book value per Share
Earning per Share

Siddhartha Bank LImited


360
778
15.79
90.75
110.83
120.63
132.29
-8.89
20.08
13.05
15.88

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
APPENDIX V (A)
Calculation of Mean, Standard Deviation, CV of MPS, DPS, BPS and EPS of BOK

DPS

BPS

EPS

(W)

(X)

(Y)

(Z)

2003/04

295

10

207.72

27.50

796556.25

416.57

2004/05

430

15

171.83

30.10

573806.25

237.47

2005/06

850

48

192.52

43.07

113906.25

309.41

2006/07

1375

20

218.38

43.50

35156.25

108.37

2007/08

2350

42.11

213.60

59.94

1351406.25

2008/09

1825

47.37

230.67

54.68

= 182.48

= 1234.73

ry

136.89

406406.25

287.64

(W W ) 2

(X

= 258.79

= 3277237.5

(Y Y ) 2

X )2

(X

3.72

1153.28
175.83
158.51
60.99

619.01

X )2

= 1496.35

Ca
m

Mean of BPS (Y) = Y

1234.73
= 205.79
6

Mean of EPS (Z) = Z

7125
= 1187.5
6

rD

182.48
= 30.41
6

Sh
an

Mean of DPS (X) = X =

ke

ev

Calculation of Mean, of MPS, DPS, BPS and EPS


Mean of MPS (W) = W =

258.79
= 43.13
6
n
Calculation of Standard Deviation of MPS, DPS, BPS and EPS
Z

Standard Deviation of MPS (W) =

Standard Deviation of DPS (X) =

(W W ) 2
=
n
X )2

(X
X

3277237.5
6
1496.35
6

=739.05

=15.79

Property of Shanker Dev Campus Library,


Putalisadak, Kathmandu - 128

(Y Y ) 2

= 2171.34

pu

= 7125

W )2

ib
ra

(W

Shanker Dev Campus Library

MPS

sL

Fiscal Year

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
=
2

(Y Y )
n
(Z Z ) 2
n

Standard deviation of EPS (Z) =


X

= 19.02

2171.34
6
= 830.20
6

= 11.76

Calculation of CV of MPS, DPS, BPS and EPS:

CV of MPS (W) = CVW

739.05
1187.5

CV OF BPS (Y) = CVY

=62.24%

15.79
=51.92%
30.41 = 27.26%

ib
ra

=
=

CV X

CV of EPS (Z)=

sL

CV of DPS (X) =

ry

=9.24%

CV Z

Ca
m

pu

APPENDIX V (B)

Shanker Dev Campus Library

Standard Deviation of BPS(Y) =

19.02
= 205.79

11.76
43.15

Calculation of Correlation Coefficient, Coefficient of Determination, Regression Analysis and

DPS
(X)

BPS
(Y)

EPS
(Z)

295

10

207.72

27.5

430

15

171.83

30.1

850

48

192.52

1375

20

2350

W2

X2

Y2

Z2

WX

WY

rD

MPS
(W)

ev

t-value between MPS and other financial indicators

100

43147.6

756.25

2950

184900

225

29525.55

906.01

6450

43.07

722500

2304

37063.95

1855.02

40800

218.38

43.5

1890625

400

47689.82

1892.25

27500

42.11

213.60

59.94

5522500

1773.25

45624.96

3592.80

98958.5

1825

47.37

230.67

54.68

3330625

2243.92

53208.65

2989.90

86450.25

= 7125

=182.48

ke

Sh
an

87025

W2

X2

Y2

Z2

WX

61277.4
73886.9
163642

300272.5
501960

420972.75
WY

=1234.73 =258.79 =11738175 =7046.17 =256260.53 =11992.23 =263108.75 =1522011.55

A. Calculation of Coefficient of Correlation


Correlation between MPS(W) and DPS(X)

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Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
N WX

( W )( X )

N W2

( W )2 N X 2 ( X )2
6 X 263108 .75 (7125 )(182 .48 )
= 0.663
6 X 11738175 50765625 6 X 7046 .17 33298 .95

Correlation between MPS(W) and BPS(Y)


N WY ( W )( Y )
r
N W 2 ( W )2 N Y 2 ( Y )2
6 X 1522011 .55 (7125 )(1234 .73)
50765625

6 X 256260 .53 1524558 .17

= 0.662

ry

6 X 11738175

N WZ

( W )( Z )

( W )2 N Z 2 ( Z)2
6 X 358127 .5 (7125 )( 258 .79 )
= 0.974
6 X 11738175 50765625 6 X 11992 .23 66972 .26

sL

N W2

Ca
m

pu

ib
ra

Correlation between MP(W) and EPS(Z)

ev

B. Calculation of Coefficient of Determination

rD

Coefficient of Determination between MPS (W) and DPS(X) = r2 = (0.661)2 = 0.439

ke

Coefficient of Determination between MPS (W) and BPS(Y) = r2 = (0.532)2 = 0.438

Sh
an

Coefficient of Determination between MPS (W) and EPS (Z) = r2 = (0.914)2 =0.949

C. Simple Regression Analysis


Simple Regression analysis of MPS on DPS
Here,
Independent Variable = DPS =X
Dependent Variable = MPS = W
Regression Equation of MPS on DPS is
W= a + bX

Property of Shanker Dev Campus Library,


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Shanker Dev Campus Library

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
Where,
a

Regression Constant

Regression Coefficient (Slope of the regression line)

na b

XW

. (I)

X
X

X 2 (II)

WX
n

W
2

X
X)

6X 263108.8 (7125)(182.48)
= 31.20
42277.02 33298.95

pu

sL

ib
ra

ry

Solving these two normal equations we get,

na b

Ca
m

Substituting the value of (b) on equation I

ev

7125=6a+ 31.20 X 182.48

rD

a = 238.604

Sh
an

ke

[Note: Similar procedure has been applied to calculate the parameters of Simple Regression
Analysis, MPS on BPS and MPS on EPS]

. To Find the Calculated Value for t-test

t-value of MPS Vs .DPS

r n 2

0.663 6 2

1 r2

1 0.439

= 1.771

t-value of MPS Vs. BPS

r n 2
1 r

0.662 6 2
1 0.438

= 1.766

Property of Shanker Dev Campus Library,


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Shanker Dev Campus Library

According to the principle of the least squares, two normal equations for estimating (a) and (b) is:

Property of Shanker Dev Campus Library


Putalisadak, Kathmandu
t-value of MPS Vs. EPS

0.974 6 2

r n 2
1 r2

= 8.59

1 0.948

E Calculation of Multiple Regression Analysis, Coefficient of Determination of MPS on DPS and


EPS of BOK

Shanker Dev Campus Library

The values of constants a1, b1 and b2 can be obtained by solving following three normal equations
simultaneously

X 3 (I)

b2

X1 X 2

a1

X2

b1

X2

X1 X 3

a1

X3

b1

X2 X3

ry

X2

X 2 X 3 . (II)

b2
b2

X 3 .. (III)

16.19
8.82

rD

ev

=
=

Ca
m

pu

Solving equation I, II and III we get


Intercept (a1) =
403.82
Regression Coefficient of (b1)
Regression Coefficient of (b2)

ib
ra

na1 b1

sL

X1

Sh
an

ke

[Note: Similar procedure has been applied to calculate Mean, Standard Deviation,
Coefficient of Variation, Coefficient of Correlation, Coefficient of Determinations,
Simple Regression Analysis, t-value, Multiple Regressions for other Banks

Property of Shanker Dev Campus Library,


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